Newcastle Building Society Annual Report & Accounts 2024
1 Cobalt Park Way
Wallsend
NE28 9EJ
0191 244 2000
newcastle.co.uk
Manchester Building Society is a trading name of Newcastle Building Society
Picture: Dave and family, Colleague
Connecting our communities
with a better financial
future
newcastle.co.uk
Newcastle Building Society Annual Report & Accounts 2024
Connecting our communities with a better financial future
Performance and Strategy
1
Performance Highlights 2024
3
Chair’s Statement
7
Chief Executive’s Review
13
Strategic Report
33
The Building Society Difference
37
Sustainability Report
Governance
51
Our Directors
57
Directors’ Report
59
Statement of Directors’ Responsibilities
61
Report of the Directors on Corporate Governance
71
Audit Committee Report
75
Remuneration Committee Report
85
Risk Management Report
97
Independent Auditor's Report
Financial Statements
109
Income Statements
110
Statements of Comprehensive Income
111
Balance Sheets
113
Statements of Movements in Members’ Interests
115
Cash Flow Statements
116
Notes to the Accounts
Other information
199
Annual Business Statement
200
Directors Listing
201
Glossary
204
Branch and Financial Advice Centre Directory
Pickering,
North Yorkshire
Contents
1
2
Performance
Highlights
Common Equity Tier 1
(2023: 12.5%)
12.2
%
Overall customer
satisfaction
Operating profit before impairments
(2023: 95%)
(2023: £31.4m)
96
%
£34.2m
Branch
Investments completed
in community grants distributed
through Community Fund
Individuals Supported
through Helping Hand
4
£140k+
188
£1.2bn
Gross residential lending
(2023: £1.1bn)
Savings balance
(2023: £5.0bn)
£5.4bn
New mortgage customers
(2023: 5,700)
5,350
Profit before tax
(2023: £29.1m)
£15.7m
10,000+
Colleague volunteering hours
(2023: 10,000+)
Colleague engagement score
(2023: +57)
+49
2
2
0
0
2
2
4
4
Chair's Statement
In 2025 the mutual sector will celebrate the passing of
250 years since the first building society was
established in 1775. So much has changed since then,
but what remains is the principle that building
societies seek to deliver purpose beyond profit, by
focusing on the interests of their Members and in many
cases, local communities.
The Government have made a commitment to double
the size of the mutual and co-operative sector. We
welcome this ambition and the recognition of the value
of the building society model and the role that
member-ownership can play in tackling the
challenges facing our country, economy, and our
Society more generally.
Newcastle Building Society, together with the
subsidiaries that make up our Group structure, has
made great progress in 2024 in the delivery of our
Purpose and creation of value for our Members across
the North East and beyond. That achievement sits at
the heart of what we now aim to deliver by bringing the
Manchester Building Society brand back to the high
streets of the North West.
Whether it’s our innovative approach to delivering
face-to-face local
financial services, the help provided
to individual Members through our work with Citizens
Advice Gateshead, or our work with Newcastle United
Foundation to improve life outcomes for disadvantaged
young people in the regions we serve, I’m proud of the
difference we’re making.
In the North West we’ve already invested heavily in
supporting new charity partnerships with Forever
Manchester and Salford Youth Zone as part of our plans
for Manchester Building Society. And in 2024, we made
an additional contribution of more than £1m to our
Newcastle Building Society Community Fund at the
Community Foundation Tyne & Wear and
Northumberland. This has helped to grow the Fund’s
endowment to more than £3.5m, securing a long-term
sustainable source of funding for our community grants
and guaranteeing meaningful support for generations
to come.
That is the kind of difference a building society can
make. Our mutual structure allows us to go where
others can’t, to make longer term decisions for wider
positive impact, to enable choices which truly put
customers and communities first.
The Society’s strategy fits the mutual model per
fectly
and is delivering results. Whilst we remain true to our
original Purpose of helping people to own their own
homes, we’re also seeing the growth in savings
balances in our branches outperform the market
average; customer loyalty and satisfaction reach record
highs; and more and more Members are joining us and
recognising the benefits o
f being part of the Society.
I’m confident that we will continue to thrive, because
despite the challenges we face, with the support of our
Members we remain well positioned to meet our
commercial ambitions and make an even greater
contribution within our regions in the coming years.
Voluntary support for Members affected by the
actions of Philips Trust
It has been very distressing to hear the problems that
Members have experienced as a result of the actions of
Philips Trust Corporation ('Philips Trust'). Although there
was no obligation to do so, the Society chose to offer
voluntary financial support to those Members impacted
by the actions of Philips Trust and this process is
already well advanced.
Members will understand this decision is consistent
with our Purpose and supporting the communities we
serve. More detail is available within the CEO Review
and on our website.
Regulatory update
In September 2024 the Financial Conduct Authority
(FCA) introduced new rules to protect access to cash in
communities where branches are closing. The aim is to
ensure reasonable access to cash and protect vital
services. We are committed to growing branch
presence in our communities and will continue to
explore new ways to address concerns over access to
cash and other financial services, especially where the
last bank branch has closed.
Our mutual structure allows us to go where
others can’t, to make longer term decisions for
wider positive impact, to enable choices which
truly put customers and communities first.
4
3
Board matters
Amanda Shepherd was appointed to the Board in
December 2024 and I’m delighted to welcome her to
the Society. Amanda joined the Executive team earlier
in the year as Chief Operating Officer, bringing a wealth
of
financial services experience and expertise.
As shared at the 2024 Annual General Meeting, Michele
Faull had previously announced her intention to step
down from the Board. Following a change in her
circumstances I am delighted that she has chosen to
remain on the Board.
In addition, we have also taken steps to strengthen our
Board with the appointment of a new Non-Executive
Director, Moorad Choudhry, in January 2025. Moorad is
a renowned expert in Balance Sheet and treasury
management, and an experienced non-executive in
financial services. I have no doubt that he will make a
very strong contribution to our Board.
In the first hal
f of 2025 we will say goodbye to David
Samper, the Society’s Chief Financial Officer and
Executive Director. Over the past 6 years David has
brought a wealth of experience and made an extensive
contribution to the Society. We wish David well for the
future. The process to recruit a successor is underway.
Looking ahead
2024 was another eventful year, creating challenges for
our Members and communities, and certainly posing
questions for businesses of all shapes and sizes. Falling
inflation and uncertainty within the wider economy
gave your Board plenty to think about in our support for
the organisation and its journey of growth.
I’m confident that the Society is making good
progress on its ambitions for growth and in amplifying
the value created for Members and in the wider
community. The recent announcement of the plans
for Manchester Building Society and our ongoing
work on the Monument flagship branch in Newcastle
city centre demonstrate the scale of our ambition and
highlight the potential of what’s possible for even more
communities in our regions. Our continued progress
in Purpose delivery, steady growth and sound financial
performance all point to the relevance of the mutual
model in these often challenging and difficult times.
I’d like to thank the colleagues who continue to work
diligently each day to provide an outstanding level of
customer service and offer my sincere thanks to our
Members who help shape the Society and provide
support in so many ways.
James Ramsbotham
Chair
28 February 2025
Chair's Statement
|
Continued
Our early talent colleages graduation
6
5
Introduction
The full year 2024 saw another strong performance
for Newcastle Building Society and the wider Group,
as we continue to keep the delivery of our Purpose,
'connecting our communities with a better financial
future' at the centre of all that we do. Delivering that
Purpose for the long term is, in our view, about more
than being just another provider of savings, mortgages
and advice. It requires a deep understanding of the
communities we serve, careful allocation of resources
and an ongoing commitment to innovation, investment
and growth across the Group.
2024 was another challenging year for our
communities, facing higher living costs and
uncertainty in the wider economy. I am particularly
encouraged by the Society’s increasing momentum in
our commitment to ‘place’, and a continuing physical
presence in our regions to support our Members and
communities. This is particularly evident in our progress
in branch innovation and investment in delivering
face-to-face service. Throughout the year we have
consistently demonstrated the importance we place
on listening to our Members and doing the right thing
for our communities.
The pace of change, growth progression, and a place-
based, Purpose-led approach gives me confidence in
the years ahead. I believe that we are well-positioned to
deliver over the long term and create even more value
for our Members and deliver greater positive impact in
our communities.
Financial performance summary
The underlying business continues to perform well and
for 2024 we are reporting an operating pro
fit be
fore
impairments and provisions of £34.2m (2023: £31.4m).
Group profit be
fore tax for the year ending 2024
was £15.7m (2023: £29.1m). On an underlying basis
operating profit was £31.9m
for 2024 (2023: £32.8m).
Gross mortgage lending for 2024 increased to £1.2bn,
exceeding the previous record level of £1.1bn set in
2023, whilst net core residential lending reduced to
£496m from £575m in 2023.
In view of the Society’s aspiration for continued growth
and development of the branch network, along with
significant investment in in
frastructure, we took the
opportunity to raise an additional £20m of tier 2
capital in June and £40m of additional tier 1 capital
in December.
Further details of
financial per
formance for 2024 can be
found in the Strategic Report.
Voluntary support for Members affected by the
actions of the Philips Trust
The full extent of the challenges faced by some
customers as a result of the actions of Philips Trust
became clear in the early part of 2024. The background
to these problems is complex, however, in summary,
the Society arranged introductions to The Will Writing
Company at differing times between 2005 and
2018 to provide later-life planning services, with the
Society stopping referrals when the service from The
Will Writing Company began to deteriorate. The Will
Writing Company went into administration in 2018,
after which Philips Trust became the trustee of some
trusts belonging to a small number of customers
originally referred by the Society and holder of some
investments. The Society was not involved in the
transfer of the trustee, any agreements customers
entered into with Philips Trust, or any decisions
taken by Philips Trust. Subsequently, assets in some
investment trusts were moved from low-risk funds with
reputable companies into high-risk funds. Customers
encountered severe difficulties in dealing with Philips
Trust and it entered administration in 2022.
As we began to understand the scale of the impact
on Members, even though the Society had no
responsibility for, nor involvement in these actions,
nor did we have any legal or regulatory obligation to
offer support, we chose to offer voluntary support to
the Members involved. The strength of the Society and
underlying performance during the year ensured that
we were able to set aside a sum of £20m to provide
this support. We believe that these actions are entirely
consistent with the principles of the Society and the
wider mutual movement, in supporting Members
through such a time of difficulty. The arrangements of
the offer were such that those wishing to take part had
to register their interest in sufficient time to complete
the process before the end of 2024.
We will continue to offer support to any current or
future police investigation which aims to hold those
responsible to account.
Throughout 2024 we demonstrated our
continued commitment to ‘place’ across the
regions and the communities we serve.
Chief Executive's Review
8
7
Manchester Building Society
We are proud of our unique understanding of what it
means to be a building society serving the communities
of the North East and the many and distinct ways in
which we have brought our Purpose to life across the
region. Throughout 2024, following the merger with
Manchester Building Society in 2023, we have been
keen to consider how we might build on what we have
learnt in the North East to develop a unique approach
that would deliver our Purpose in ways that would truly
resonate with the communities of the North West.
In early 2025 we announced investment plans to
breathe new life into our Manchester Building Society
brand, making it relevant to communities in Greater
Manchester and the wider region. Working with local
leaders and the community, we aim to create a financial
services offering based on the same principles of local
face-to-face advice and trustworthy
financial products
that Newcastle Building Society has so successfully
delivered in our North East, Cumbria and North
Yorkshire regions.
The North West is one of the UK’s top four worst hit
regions for bank and building society branch closures.
More than 700 branches have closed since 2015,
leaving many with few or no options to bank locally,
and struggling to access cash. By contrast, Manchester
Building Society will open branches, starting in the
heart of Manchester city centre, and over time across
Greater Manchester’s towns and the wider North West.
Creating value for our Members and communities
Throughout 2024 we demonstrated our continued
commitment to ‘place’ across the regions and the
communities we serve. This is true right across the
Newcastle Building Society Group, whether through
our Newcastle Building Society or Manchester Building
Society brands, or our subsidiaries, Newcastle Financial
Advisers and Newcastle Strategic Solutions.
At the heart of that commitment is the provision of
competitive savings and lending products, alongside
financial advice accessible to all in every one o
f our
branches. We don't see financial advice as a service
solely for the wealthy, but something that is appropriate
for every customer, as ‘helping people to plan their
financial
futures’ is critical to the difference we can
make within our communities through financial
services provision.
The Standard Variable Rate (SVR) for Newcastle
Building Society mortgages remained one of the most
competitive on the market at 6.94% throughout 2024
vs a market average of 7.87%, (source: Moneyfacts)
saving our SVR borrowers around £2.8m in interest
payments during 2024 compared to the market
average. Significant investment into our Intermediaries
brand and online lending tools has vastly improved the
experience for our broker partners.
We have continued to make progress with our strategic
priority of helping people to own their own home, with
5,350 new mortgage customers during the year
(2023: 5,700).
Over the 12 months to December 2024 our average
savings rates for Newcastle Building Society customers
were 0.56% higher than the market average (source:
CACI), resulting in £28.1m more savings interest for our
Members compared to the market average.
Our 2024 savings growth was driven by the success
of our branch network, contradicting established
industry thinking that the provision of accessible face-
to-face
financial services is prohibitively costly, and
‘justification’
for extensive bank branch closures
since 2016.
We see a very different future for branches and the
role they can play within a community as part of our
long-term thinking. Since 2015 we’ve invested around
£10m in new branch locations and the refurbishment of
existing facilities. In 2024 we opened our 32nd branch
in Pickering, restoring access to financial services
in the town, and continuing the pioneering use of a
multi-bank kiosk within our branches, working with
our fintech partner OneBanx. These kiosks benefit the
whole community by making available to all, free-to-
use bank current account cash deposit and withdrawal
facilities for both personal and small business
customers, with no requirement to be a Member of
Newcastle Building Society in order to make use of
the services.
In North Shields, we relocated our branch to share
space with YMCA North Tyneside at their vibrant
community hub, placing our full range of branch
services alongside their busy café, gym, and
programme of community activities. A full branch
refurbishment in Hartlepool and a relocation to a new
facility in Middlesbrough completed a busy year of
branch investment which also included the ongoing
work on our flagship Monument location in Newcastle
city centre, due to open in 2025.
As mentioned, our intent in the North West is to
create a Manchester Building Society branch network
including a commitment over time, to open branches
across the boroughs of Greater Manchester and the
wider North West which will create good jobs for local
people and be a catalyst for success in Manchester just
as it has been throughout the North East.
Continued demand for accessible, in-person
financial advice remained strong in 2024 across the
communities we serve, with approaching 11,000
appointments undertaken by our qualified team
of
financial advice experts
from our wholly owned
subsidiary, Newcastle Financial Advisers Limited.
Newcastle Financial Advisers has seen an increasing
demand for
financial advice, supporting customers
with key decisions around pensions and retirement
planning, as well as investment, inheritance tax and
protection advice. Having recently surpassed £1billion
of assets under management, Newcastle Financial
Advisers remains committed to providing expertise,
advice and support to all of our Members throughout
their lifetime. Newcastle Financial Advisers also
achieved the VouchedFor ‘Top Rated Firm’ status for a
third consecutive year, with an average rating of 4.9/5
for the service they provide to their customers.
For more detail on our approach to the provision of
face-to-face
financial services in our communities,
please see the Strategic Report section.
Our branch-based model fuels our business success. In
2024, branch savings balances grew by £442.2m and
at a rate of 14.9% (2023: £332.1m and at a rate of 12.2%)
compared to the rest of market average across all
channels (which includes online) of 5.4%. With savings
balances growing at a much higher rate than the rate
of the market average, the commercial bene
fits o
f
listening to our Members and responding to their needs
is clear.
In 2024, we achieved record high levels of customer
satisfaction at 96% (2023: 95%) and a record high
net promoter score (NPS) of +86 (2023: +82), which
suggests that customers value our approach, continue
to choose Newcastle Building Society and recommend
our services to others.
Our subsidiary, Newcastle Strategic Solutions Limited
(Solutions), has a vital role in generating profits
for the
Group and in 2024 celebrated 20 years of supporting
its clients with outsourced savings management.
Solutions saw further positive growth during 2024 with
client savings balances under management exceeding
£50bn for the
first time (2023: £47bn) and increasing
its client base to 17 UK banks and building societies
from 16 in 2023. The Solutions business again invested
heavily in its savings infrastructure and supporting
technologies including the transition of all its retail
savings clients onto a new digital savings platform,
the rollout of a new workforce management tool, and
the implementation of 'Contact Centre as a Service'
capabilities. It also delivered on a number of important
regulatory changes impacting its clients and their
customers such as Consumer Duty, Confirmation o
f
Payee and Authorised Push Payment fraud rules.
A community catalyst
With a member-owned model comes a transformative
potential to create a better financial
future for our
customers, our communities and the places we share.
Making that difference in the most impactful way was a
focus for 2024.
In the North West, we’re pleased to have already
committed to working with and supporting two
amazing charities as part of our inaugural investment in
the region: Forever Manchester, and Empower Salford
Youth Zone. We have taken our time to speak with local
people, charities and other groups to ensure that what
we are building here responds to their needs. And we
expect this to be just the start as we work with partners
across Manchester in delivery of our Purpose, creating
long term, scalable benefits and sustainable legacy.
Listening to Members is incredibly valuable in getting
close to what matters to them and their communities.
In 2024, we held a series of local listening events,
taking time to meet with Members across our regions
and hear their specific needs and concerns. Another
way we seek to understand what’s important in our
communities is through our support for the Community
Foundation Tyne & Wear and Northumberland in their
creation of Vital Signs 2024, a wide-ranging study into
the issues impacting the North East.
Events held in our offices and at The Glasshouse
International Centre in Gateshead brought over 300
business leaders, academics, charities, community
groups, philanthropists, entrepreneurs and members
of local government together in discussion, aiming
to spark conversation and collaboration to drive
meaningful and sustainable change in our region.
One of the ways we aim to create positive change
in our communities is through the Newcastle
Building Society Community Fund at the Community
Foundation Tyne & Wear and Northumberland. Vital
Signs helps inform our strategic community priorities
and throughout 2024, 24 grants totalling more than
£140,000 were allocated from the Fund, supporting
more than 200,000 people across our region.
In 2024 we made a further donation of more than
£1m to the endowment which supports the Newcastle
Building Society Community Fund to help make an
even bigger impact in the years ahead, building an
even bigger legacy for generations to come as part of a
long-term commitment to our charitable sector.
More than 10,000 colleague hours were volunteered on
activities across our communities during 2024.
For more on how we seek to create a lasting,
positive impact in our communities, including our
work with Citizens Advice Gateshead, Newcastle
United Foundation, and colleague volunteering and
fundraising initiatives, please see the Strategic
Report section.
Chief Executive's Review
|
Continued
9
10
Creating a great place to work
Through our ‘A Place To Be You’ strategy, we’re focused
on building a diverse workforce which represents all
our communities where everyone feels able to be
themselves at work and can achieve their potential.
We continue to make good progress on our long-term
journey to evolve our culture by building on our solid
foundations through our ‘Be the Change’ programme,
to ensure we are ready to address the challenges
ahead as we seek to deliver our ambitions for growth
and success.
In 2024 we became the first organisation in the North
East and the first building society in the UK to become
an accredited Living Pension employer. This means
all new colleagues receive a default level of pension
contribution aligned to Living Pension standards.
Over the year we have seen our colleague employee
net promoter score (eNPS) fall slightly to +49 (2023:
+57). The degree of investment and change within the
business means that the fall in colleague engagement
is not unexpected. However, a score of +49 remains
a very positive result and places us above our survey
provider’s finance sector benchmark.
Looking ahead
Despite the many challenges in the external
environment, 2024 proved to be a year of progress for
the Society with improvements in our infrastructure,
the service we provide to Members and in our financial
results. We never lose sight of the fact that this
progress would not be possible without the dedication
of our colleagues, the collaboration of our strategic
partners and most importantly of all, the support of
our Members.
In 2024 we laid the foundations for a bright new future
for the Manchester Building Society brand and a
continuation of commitment to community and high
streets from the whole Society. Our investment in
digital capabilities for the Solutions business will ensure
that it is ready to continue its development road map
and the evolution of its services. We look back on 2024
with gratitude to all those who made our journey to
date possible and look forward with positivity, as we
seek to further our efforts to ‘Connect our communities
with a better financial
future’.
Andrew Haigh
Chief Executive
28 February 2025
MIchelle,
colleague West Denton
Chief Executive's Review
|
Continued
12
11
Ben,
colleague North Shields
Report
Strategic
14
13
Strategic Report
Our Purpose, strategy and stakeholders
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 led from the Purpose of the organisation, valued by, and compelling to, its customers, and is
financially robust.
We help people to own their own home, to save
and to plan their finances
We help 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 each customer on their
circumstances. We help people with very different
circumstances and requirements, such as first-time
buyers, people borrowing in retirement and the
self-employed. We offer long-term
financial planning
through our Newcastle Financial Advisers subsidiary,
with a qualified, pro
fessional
financial adviser available
in all our branches.
We build lasting, authentic relationships with our
customers 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 the Newcastle
United Foundation and the King's Trust. We also provide
significant financial support to local good causes
through our grants programme.
We care for our environment and ensure its
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.
What we do
Our Purpose
Connecting our
communities with a
better financial
future.
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 32 locations on high streets stretching across the North East, Cumbria and North Yorkshire. In the
North West, we’ve committed to opening a Manchester Building Society flagship branch in 2025. We care about our
communities and are deeply committed to making a positive difference for the people and places we serve.
We are owned by our Members (not shareholders), which allows us to focus on what’s really important – delivering
fair value through the products we offer, providing our customers with amazing service and building a sustainable,
successful business that bene
fits our Members, communities and regions, both now and in the
future.
We care about building lasting, authentic relationships with our customers, which means that while digital and
intermediary channels play a key role in our distribution and service delivery, face-to-face contact and a thriving
branch network are particularly important. We are therefore keen to innovate in this area, ensuring we can continue
to play a role in maintaining vibrant high streets across our regions. We call this being 'Powered by Purpose'.
As a Member-owned business, 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.
15
16
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.
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 deliver each year:
Product value, service and accessibility
Membership and community
Partnerships and employment
In 2024, we were delighted to become 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.
Strategic Report
| Continued
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 customers,
who are also our key stakeholders, but also has the
attributes required to power a successful commercial
outcome as a result.
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 bene
fit o
f Members,
and provide the capital to underpin our operations,
providing resilience and security for our Members.
Our ‘strategy wheel’ summarises our approach and
demonstrates how each aspect of our business
contributes and complements each other 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.
1.
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’.
2.
Building our brand 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.
3.
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.
4.
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.
5.
Understanding that making a positive
contribution to the region’s sustainability and
environment is no longer a matter of choice
but necessity.
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...
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:
18
17
Strategic Report
| Continued
Our customers
A key part of our strategy is delivering outstanding
levels of service and building authentic long-lasting
relationships with our Members. In 2024, we increased
our net promoter score to +86 (2023: +82) and achieved
a strong customer satisfaction score of 96% (2023:
95%), demonstrating our commitment to this strategy
and something we are very proud of.
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 2024, we received almost 23,000 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 have used this feedback to improve our products
and services we deliver to Members and many of
them have consented to provide testimonials to
communicate across our social media platforms,
enabling us to share our customers' voices in the
external environment.
We continue to engage Members in the direction
of the Society’s goals and ambitions. ‘Connected
Communities’, a Member initiative that we launched in
2021, is an online forum where views can be exchanged
and gathered. Over the last year, ‘Connected
Communities’ has seen Member engagement grow
consistently, with poll votes increasing by 34% in
2024. Since inception, ‘Connected Communities’ has
captured over 4,150 comments, 450 items of content,
and over 4,450 poll votes; a huge testament to the
value our Members place on being part of our Society.
In January 2025 we launched our sister platform,
‘Connected Communities’ powered by Manchester
Building Society. The tool will expand our listening
programme and will give us a dedicated space to have
valuable conversations with the North West community
as we co-create the brand with the Greater
Manchester community.
Our communities
During the year we continued to support the people
and places within our regions in a variety of ways,
including through key long-term strategic partnerships
and collaborations:
We have given Members and colleagues a 'Helping
Hand' through our tailored, confidential support
and advice service delivered by Citizens Advice
Gateshead. By providing easy-to-access, free-to-
use guidance, advice and practical assistance
across a wide range of topics, we have supported
nearly 200 individuals, helping to unlock more than
£300,000 in additional income through advice on
eligibility for bene
fits and wel
fare support.
We contributed an additional £1.1m to the
Newcastle Building Society Community Fund
at the Community Foundation Tyne & Wear and
Northumberland, building the endowment to
around £3.5m and increasing the level of funding
which will be made available to charities in our
regions for generations to come.
In collaboration with our partners at Newcastle
United Foundation, branch colleagues delivered
more than 200 different financial coaching
sessions or scam awareness talks and visited
more than 50 schools, reaching nearly 5,000
pupils. In addition, 76 colleagues helped deliver
33 different employability sessions, reaching more
than 5,000 participants.
Volunteering-friendly policies enable colleagues to
donate their time to local good causes and create
new connections with their communities. Through
the Newcastle Building Society Community Fund
at the Community Foundation Tyne & Wear and
Northumberland, grants are provided to local charities
tackling the issues of employability, debt management,
homelessness, food poverty, and the environment.
Please see The Building Society Difference report for
more information.
Our branches
With 32 branches on high streets stretching across the
North East, Cumbria and North Yorkshire, we believe
that branches play an essential role in the heart of
our communities. We are committed to growing our
presence on our high streets and in our town centres
and making people think differently about branches.
A vibrant high street is often the beating heart of
a community, providing local jobs, services and
driving economic wellbeing. Financial services are an
important part of this, so when the last bank branch
closes, the damage to the community extends far
beyond its customers.
We are making the most of people and partnerships
to deliver for our communities. This means bringing
new thinking and working with like-minded partners
to re-imagine what a branch could be, opening
branches in innovative locations and sharing space
with local services such as libraries, tourist information,
community centres and even the police.
We have seen a number of exciting developments in
our branch network during the year, with more details
on this found in The Building Society difference report.
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 pro
fits
from
prior years.
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 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 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.
Our business model
financial
future’. As a Member-owned, mutual, 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 believe will be well
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 region through our role as employer, enabler o
f 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 o
f our core skills, savings management, and
offering that as a service to other banks and building societies.
19
20
Strategic Report
| Continued
2024 saw the launch of our leadership skills academy,
alongside giving all colleagues access to the virtual
learning platform LinkedIn Learning. Our ongoing
commitment to our employability agenda saw our early
talent programme go from strength to strength in 2024,
welcoming a new cohort of graduates, apprentices and
students across the organisation. We will continue to
build and develop the programme more widely in 2025,
with a clear focus on inclusion,
financial education and
the ongoing development of strategic partnership.
Workday, the Group’s newly implemented HR and
financial system, presented opportunities to revisit our
approach to performance and supporting colleagues to
realise their potential and 2025 will see a clear focus on
how we effectively manage our talent to support future
success through the stability and strength of our
people structures.
Diversity, equity and inclusion
In 2024, we continued to embed our ‘Place to Be
You’ strategy which aims to cultivate a workforce
and future talent pipeline that represents the diverse
communities we serve and create a culture where
every colleague feels able to be themselves
and belong.
The diversity, equity and inclusion (DE&I) steering
committee chaired by our Chief Executive Andrew
Haigh, meets on a quarterly basis and is tasked with
overseeing the implementation and delivery of our
‘Place to Be You’ strategy and plan.
Drawing on data and insight, our programme of
activity has been designed to support the delivery of
our five strategic DE&I goals.
The Group places a great deal of emphasis on
engaging colleagues in the ongoing development of
its business and delivering its Purpose and strategy.
‘Colleague Voice’, our colleague survey methodology,
is representative of views from colleagues across
our Group and can make a significant contribution
to our ongoing development, both from a business
performance and a colleague experience perspective.
Our approach to colleague surveys enables us to
measure colleague engagement at a strategic level as
well as provide managers with the ability to listen to
colleagues and work with the feedback, incorporating
these insights into their daily thinking, decision-making
and conversations.
Our survey practices, tools and resources provide
managers with real-time access to their feedback,
as well as the ability to respond real-time and create
simple and effective action plans to drive positive
change, empowering leaders and managers to own
their colleague engagement with their teams.
Employee net promoter core or eNPS is our strategic
people metric and enables us to benchmark ourselves
against the financial services sector and the very best
employers across the industry. With so much change
in the organisation, we have seen our eNPS score fall
slightly for 2024 to +49 (2023: +57); a score of +49 is
a very positive result and places us in the top 25% of
the financial services sector within Workday Peakon’s
(our provider) global client database. We are delighted
to have also maintained our prestigious Investors in
People Platinum status in 2024.
We launched a culture programme in 2024, which
gathered views and insights from colleagues across
the Group, this has culminated in a new behavioural
framework: Be Collaborative, Be Curious, Be
Courageous, Be Efficient and Be Accountable. We will
continue to drive, review and measure the culture in
the Group in 2025 and beyond.
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 2024 pay rise for colleagues ranged
from 0% to 19%, with an average increase of 6.0%
received by colleagues.
The Society has overall accountability for ensuring
the health, safety and wellbeing of all its colleagues.
Through the way we work and behave, we are
committed to protecting all colleagues and visitors who
may be affected by our work activities.
Through an ongoing and determined commitment
to continually improve health and safety at work, the
Society is committed to ensuring that effective health
and safety management is paramount to the business
and actively contributes to our success.
Supporting colleagues with their health and wellbeing
has continued to be an area of focus throughout 2024.
We have raised awareness of key topics such as mental
health, menopause and endometriosis and are working
with key partnerships such as Henpicked and Andy’s
Man Club. We have also reviewed our people policies
across 2024, enhancing our Parental Leave, Absence
and Wellbeing and Reasonable Adjustments Policy and
introducing a new Fertility Policy.
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.
Our colleagues
Being a great place to work where people can realise their potential is key to living our Purpose.
Our people strategy focuses on providing an immediate, ongoing and long-term framework for engaging,
developing and managing our people, creating an inspiring place for people to work and be able to achieve their
full potential whilst delivering the Group's ambitions with our people vision and key priorities shown below:
Right
people
Loving what
they do
Doing it the
right way
Doing it
well
Early Talent
Talent
Enablement
Colleague
Experience
Leadership and
Culture
Organisational
Design
Diversity, Equality
& Inclusion
Performance
Reward
1
Create an
environment where
colleagues can be
themselves at work,
perform at their
best and belong
4
Remove the structural
barriers to inclusion,
providing fair, equitable
and accessible practices
for
all
5
Diversify our supply
chain and community
partners, collaborate
with them to achieve our
diversity, equity and
inclusion goals together
3
Attract, recruit,
develop and retain
the best diverse
talent to create high
performing
innovative teams
2
Create shared
ownership and hold
ourselves
accountable for
making progress
Inclusive culture
Leadership & governance
Inclusive by design
Talent management
Community & supply chain
21
22
Strategic Report
| Continued
Rory Campbell
Board Sponsor
Andrew Haigh
Chief Executive Officer
Overall sponsor for DE&I
DE&I Steering Committee
DE&I Working Group
DE&I Workstreams
In April we launched a suite of enhancements to
our family leave provision and support through the
introduction of equalised parental leave to all parents
regardless of their route to parenthood, combined with
enhanced support for fertility, neonatal and baby loss.
To strengthen our ability to attract, develop and retain
a diverse talent pipeline, we partnered with the Clear
Company to undertake an inclusive recruitment audit.
We are using this insight to remove any barriers to
employment by making our hiring practices
more inclusive.
Through our partnerships with Goss and the Digital
Accessibility Centre, we remain focused on creating an
accessible and inclusive experience for our colleagues,
Members and communities.
We also carried out accessibility audits of key branch
sites and our digital environments to support us in
building the foundations that will enable us to become
inclusive by design.
Working in collaboration with our colleague-led
networks, we have continued to raise awareness and
provide education around key topics such as gender,
race, menopause, neurodiversity, disability, wellbeing
and LGBTQ+ inclusion, through a calendar of events.
We held our first Powered by Pride event in June,
which raised awareness of the disparities that exist for
the LGBTQ+ community through a regional, UK and
global lens. Over 170 people attended the event and
collectively considered the actions they could take to
build LGBTQ+ inclusive practices in their respective
organisations. Following this in July, we celebrated
Pride across the region with over 80 colleagues joining
the Northern Pride march.
In August, it was an honour to be headline sponsor of
the Newcastle Mela, the largest multi-cultural festival
in the North East which celebrates South Asian culture
and brings diverse communities together to build
greater community cohesion, social integration
and connection.
We were pleased to be awarded bronze status in both
the Clear Assured external inclusion maturity index
and the Stonewall Workplace Equality index this year in
recognition of the progress we continue to make.
In 2020 we committed to the Women in Finance
Charter. The charter is a commitment by the
government and signatory firms across the finance
sector to work together to build a more balanced and
fair industry and to create gender balance, particularly
at mid and higher levels across financial services firms.
Since signing the Charter, we have achieved a 20%
increase in female representation across Senior
Management positions (which includes our Board,
Executive Committee and Executive direct reports).
We have set ourselves a target to achieve a gender
balanced Senior Management population by 2026.
*Senior Management is defined as Board, Executive Committee and
Executive direct reports
Our Group structure
At our core, we remain a straightforward saving,
lending and advice business putting Members at the
heart of what we do. As well as providing mortgage
and savings accounts to our Members, we also
provide a number of other related services, including
regulated financial advice
for investments through our
subsidiary Newcastle Financial Advisers, an appointed
representative of Openwork LLP.
Newcastle Strategic Solutions
Newcastle Strategic Solutions (Solutions) provides an
award-winning, full savings solution for some of the
UK’s leading savings providers. Celebrating its 20th
anniversary of being in business in 2024, Solutions
manages 1.6 million savings accounts and £51 billion in
savings deposits on behalf of its clients, growing from
1.5 million savings accounts and almost £50 billion in
savings deposits in 2023. Solutions is widely
recognised as powering more savings operations than
any other provider.
Solutions plays an important part in helping to deliver
our Purpose-led strategy as the Society directly
benefits
from its investment in technology, resilience
and infrastructure. Solutions is also a large regional
employer and is an important source of talented
colleagues for the wider Group helping to power its
employability agenda.
Newcastle Financial Advisers
Newcastle Financial Advisers, our financial advice
subsidiary, provides Members with trusted financial
advice, something we believe everyone deserves and
should have access to. We have been providing our
financial advice service through Newcastle Financial
Advisers for over 20 years, providing customers with
a variety of solutions and excellent service tailored
to their specific needs. Continuing to support our
communities in achieving better financial
futures in the
North East of the UK, and a commitment to extend that
support into the North West.
Newcastle Financial Advisers continues to grow its
position on the high street along with its reach into
our communities. Having recently surpassed £1billion
of assets under management they remain committed
to providing expertise, advice and support to all our
Members throughout their lifetime. Through Newcastle
Financial Advisers, we are proud to offer:
1.
Personalised financial advice and services:
Advice on products and ongoing support that are
tailored to individual needs to ensure their money is
working as hard as possible.
2.
No pressure to make decisions:
There is no
obligation to follow any advice provided and
there is no rush to make a decision. No fees are
charged unless any recommendations made are
implemented. Any associated costs are clearly
explained at the outset.
3.
Trustworthy specialist advisers you can always
reach:
Financial Advisers are available to meet
face to face in every Newcastle Building Society
branch. The availability of telephone and video
chat options also means there is always a way
to get in touch and give financial planning the
attention it deserves. Our advisers are there to have
a friendly, jargon-free chat, however and wherever
is most convenient.
4.
Helping Members at every stage of their life
By offering investment, pensions, retirement, life
and income protection insurance and inheritance
tax planning. As circumstances change, so do
financial needs and goals. Members can continually
access and review their plans with a Financial
Adviser as their needs change. Ensuring financial
objectives are always on track to give a better
financial
future.
5.
Choice and flexibility:
Being part of the Openwork
Partnership, one of the UK's largest and longest
established financial advice networks, means
Newcastle Financial Advisers can offer advice on a
wide range of products and high-quality services
tailored to personal needs.
6.
A service that is open and accessible to everyone:
Unlike many UK banks and building societies,
there is no minimum investment required. In fact,
customers are welcome to ask for advice even if
they do not take up our recommendations.
No matter how much Members have saved, want
to invest or to review any existing plans, Newcastle
Financial Advisers are available to give their customers’
financial planning the attention it deserves.
Female
Male
2024
2023
2024
2023
Senior Management*
49%
49%
51%
51%
Managers
47%
47%
53%
53%
Colleagues
66%
66%
34%
34%
Overall
60%
61%
40%
39%
We have continued to make progress against each of our DE&I goals throughout 2024.
Our colleague-led networks are integral to us creating a workplace where all our colleagues feel able to be
themselves and belong. By sharing their lived experience and diverse perspectives they have helped us to build
more inclusive policies and working practices throughout the year.
23
24
Strategic Report
| Continued
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 be
fore tax*
Profit be
fore tax as reported in
the income statement.
2024: £15.7m
2023: £29.1m
To ensure we generate
the necessary capital to
grow the business.
Operating profit be
fore
impairment and provisions
Operating profit be
fore
impairment and provisions
as reported in the income
statement.
2024: £34.2m
2023: £31.4m
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
represents the Group’s
true performance.
2024: £31.9m
2023: £32.8m
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 o
f risk
weighted assets).
2024: 12.2%
2023: 12.5%
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.
2024: 5.2%
2023: 4.8%
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 out
flows
over a 30 day stress period.
2024: 229%
2023: 227%
Ensures the Group has
sufficient liquidity to
operate.
Efficiency
Cost to income ratio
Administrative expenses,
depreciation and amortisation as
a percentage of total income.
2024: 78%
2023: 77%
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.
2024: 1.44%
2023: 1.50%
To measure the income
we generate from our
mortgage and savings
accounts.
Senior management consider a wide range of
financial
and non-financial metrics to assess the per
formance
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 be
fore impairments 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 with further detail provided in
the financial KPIs and analysis section.
Our financial performance
The Chief Executive’s Review details the Group’s
performance throughout 2024 and should be read
in conjunction with this report. The Strategic Report
outlines the financial per
formance of the Group
during 2024.
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 £6.6 billion (2023: £6.2 billion). For 2024,
we are reporting a decrease from 2023 pro
fit
for the
year before taxation from £29.1m to £15.7m in 2024,
predominantly as a result of the announcement to
provide voluntary financial support to Members who
are affected by the actions and subsequent collapse of
Philips Trust. Further details of this voluntary support
are found in the Chief Executive’s Review and in note 25
of the Annual Accounts.
* Included as a key measure in the Executive Directors’ Remuneration Policy calculations. For further details see the
Directors’ Remuneration Report.
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.
2024: £1,196m
2023: £1,103m
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.
2024: £496m
2023: £575m
Helping people own their
own homes.
Helping people save and
plan their finances.
Savings
Savings balances
The value of savings balances
held by our Members.
2024: £5,433m
2023: £5,014m
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.
2024: 96%
2023: 95%
Building lasting authentic
relationships.
Customer engagement score
(NPS)*
Customer engagement measures
the loyalty of our customer
relationships.
2024: +86
2023: +82
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.
2024: +49
2023: +57
Being a great place to
work where people can
realise their potential.
25
26
Strategic Report
| Continued
Our operating profit be
fore impairment and provisions
has increased
from £31.4m in 2023 to £34.2m in
2024, demonstrating the core strength of the Group’s
operating model and we continue to operate with
strong capital ratios and have robust liquidity ratios.
Financial profitability
Profitability is one o
f the key performance measures
the Board monitors closely. The Society seeks to
make sufficient profit in order to invest in and grow
the business for the bene
fit o
f its current and
future Members.
Alternative performance measures
The Board reviewed and was satisfied that the
alternative performance measure of underlying pro
fit
before tax, which is reported alongside the statutory
profit measure, gives a clearer view o
f the underlying
performance of the business for our Members.
The following items are considered in determining the
underlying profit o
f the Group. They are items de
fined
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.
On an underlying basis, operating profit be
fore
impairment and provisions was £31.9m in 2024, a
reduction of £0.9m from £32.8m in 2023, as a result of
costs increasing slightly more than underlying income,
with more detail found in the following pages. The key
non-underlying adjustments in the year include a fair
value gain (net of movements in associated interest
rate swaps) of £4.9m on the equity release mortgage
book, and IT transformation costs of £2.6m, relating to
the extensive investment in IT infrastructure during
the year, which includes the replacement of the
Group’s legacy financial and HR systems with a state-o
f-
the-art system.
The following table shows a reconciliation of operating
profit be
fore impairment and provisions to underlying
operating profit. Segmental in
formation is available in
note 9 to the Annual Accounts and details the Member
business and Solutions’ business segments.
Net interest margin
Net interest income increased by £5.5m to £91.9m
in 2024 (2023: increase of £11.0m to £86.4m) and
our net interest margin was 1.44% (2023: 1.50%). Net
interest margin was expected to fall in 2024 as retail
cost of funds continued to rise in the
first hal
f of the
year following the increase in bank base rate in 2023.
This was further impacted by two base rate cuts in the
second half of the year which we chose not to pass on
in full to savings customers in order to protect Member
Value. Net interest income grew as a result of Balance
Sheet growth, with mortgage balances, including
provisions and accounting adjustments, increasing by
£429.6m and savings balances increasing by £418.4m
(2023: increase of £600.2m and £793.5m, respectively).
Summary Group Income Statement
2024
2023
£m
£m
Net interest income
91.9
86.4
Other income and charges
61.0
51.5
Total operating income
152.9
137.9
Administrative expenses
(111.1)
(100.1)
Depreciation
(7.6)
(6.4)
Operating profit be
fore impairments and
provisions
34.2
31.4
Impairment reversals / (charges) on loans
and advances to customers
2.5
(1.1)
Impairment charges on tangible and
intangible assets
-
(0.3)
Provision for liabilities and charges
(21.0)
(0.9)
Profit
for the year before taxation
15.7
29.1
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 £9.5m to £61.0m in
2024 from £51.5m in 2023.
Administrative expenses and depreciation
Overall management expenses (the sum of
administrative expenditure and depreciation) increased
to £118.7m from £106.5m, re
flecting investment in the
Group’s colleagues and systems, following increased
colleague costs and replacement of the Group’s legacy
financial and HR systems to help ensure the Group’s
infrastructure and operational capabilities support our
future strategy.
The cost to income ratio is broadly in line with the
previous year at 78% in 2024 (2023: 77%). The cost to
income ratio reflects costs deemed to be under the
control of management (administrative expenses plus
depreciation as disclosed in the Income Statements)
divided by total operating income, as similarly
presented. Management assesses the ratio as a
measure of operating efficiency and continues to look
for ways to improve this metric.
Impairment charges
During the year inflation has reduced and remains
below current average earnings growth. Bank base rate
has also reduced and overall, the cost of borrowing has
reduced, which has eased affordability pressures and
supported a recovery in the housing market, with house
prices increasing by 4%.
Although residential mortgage arrears have increased
to some extent, in line with the overall market,
borrowers have remained very resilient to affordability
pressures. The improvement in the economic outlook
over the year has resulted in provisions for expected
credit losses decreasing over the reporting period to
reflect all these
factors.
Impairment provisions for loans and advances
to customers
The Society saw a net gain from releases on impairment
for loans and advances to customers of £2.5m in 2024
(2023: charge of £1.1m).
The following table provides an overview of the
movement in provisions. More details are included in
notes 41 and 42 to the Annual Accounts.
Prime residential and buy-to-let lending
In 2024, increases in residential lending increased
provisions by £1.4m, whilst redemptions resulted in
a £0.8m reduction, with £1.2m of provisions released
on residential and buy-to-let mortgages as the macro-
economic outlook improved during the year, resulting
in a net gain of £0.6m. The mortgage loss provision
coverage ratios moved from 0.13% to 0.11%.
Legacy books
The Society successfully continued winding down
its legacy portfolios, seeing the redemption of, or
capital repayments against, legacy loans, reducing the
balances by £15.0m and a reduction in provisions
of £0.4m.
A number of loans acquired as part of the merger with
Manchester Building Society in 2023 were classed as
Purchased or Originated Credit Impaired on merger,
resulting in the loans being recognised on the Balance
Sheet at the net amount of gross mortgage balance
less provision, as required by accounting standards.
Following redemptions of £3.0m of these loans,
provisions of £1.5m which were originally netted off the
gross mortgage balances have been released, leading
to a £1.5m gain to the Income Statement.
Provisions for liabilities and charges
Provisions for liabilities and charges increased from
£0.9m in 2023 to £21.0m in 2024 as a result of costs
recognised following our commitment to provide
voluntary financial support to help Members whose
trusts are affected by the actions and subsequent
collapse of Philips Trust, as outlined in the Chief
Executive’s review.
Management has determined that the estimate of the
total cost of the voluntary scheme and associated
costs to be incurred (net of the recovery received from
Philips Trust administrators (see below) and including
legal and scheme costs) will not exceed £20m.
Cost to income ratio
2024
78%
2023
77%
2022
74%
2021
71%
2020
81%
27
28
Operating profit
2024
2023
£m
£m
Operating profit be
fore impairment
and provisions
34.2
31.4
Gain in fair value of equity
release mortgages
(4.9)
(0.5)
Hedge ineffectiveness (gain) / loss on
accounting hedges
(0.3)
0.5
Revaluation loss on equity investments
0.4
0.2
Foreign exchange movements
(0.1)
(0.3)
IT transformation costs
2.6
0.2
Transactional costs
-
1.3
Underlying operating profit
31.9
32.8
Net interest margin
2024
1.44%
2023
1.50%
2022
1.48%
2021
1.21%
2020
1.04%
Movements
in loans and
advances to
customers
and related
provisions
Opening
balance
New
originations
in 2024
Redemptions
Movements
relating
to loans
originated
before
2024
Closing
balances
Prime and
buy-to-let
Loan balance (£m)
4,409.4
1,146.6
(647.8)
-
4,908.2
Provision (£m)
5.8
1.4
(0.8)
(1.2)
5.2
Legacy (excl)
housing
associations
Loan balance (£m)
43.0
0.7
(15.7)
-
28.0
Provision (£m)
1.8
0.6
(0.5)
(0.5)
1.4
Strategic Report
| Continued
At 31 December 2024, £10.1m of payments had been
made to affected customers, with remaining payments
expected to be made in the first hal
f of 2025. In
addition, £1.2m was received from the administrators
of Philips Trust from the recoveries made from Philips
Trust investments, which has been netted off the cost
of the provision. Additional recoveries are being sought
to reimburse the Society’s costs of providing support
to affected customers. Whilst additional recoveries are
expected in 2025, these have not been recognised in
the Balance Sheet in line with accounting requirements.
At 31 December 2024, the remaining provision being
held in respect of this scheme was £10.5m. More
detail on the provision is found in note 25 to the
Annual Accounts.
Taxation
The Group shows an effective corporation tax rate of a
5.1% credit in 2024 (2023: 23% charge). The overall tax
credit during the year is made up of both tax payable
against 2024 profitable operations and the recognition
of £4.0m of deferred tax assets relating to taxable
losses of Manchester Building Society. These have been
recognised in the current period following a change
in tax regulations applicable to Building Societies
during the year, allowing the Society to utilise the tax
losses against profits since 1 July 2023. This results in
the effective rate paid in the current year being lower
than the statutory rate of 25%, 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.
Liquid assets
The Society has continued to maintain a level of high
quality liquid assets throughout 2024. 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.
The Society’s strong liquidity position is also
demonstrated by the Liquidity Coverage Ratio, which
was 229% at 31 December 2024 (2023: 227%), well in
excess of the regulatory requirement of 100%. The
Society complied with all regulatory and internal
liquidity requirements throughout the year.
As mentioned, the Society has access to the Bank of
England liquidity schemes and has pre-positioned
mortgage collateral and asset-backed securities that
provide funding as part of business as usual and
contingency funding plans.
The statutory liquidity percentage (liquid assets as a
percentage of shares, deposits and liabilities) reported
at 31 December 2024 was 19.0% compared to 21.5%
in 2023.
2024
2023
£m
£m
Assets
Liquid assets
1,155.6
1,250.3
Derivative financial instruments
56.6
50.9
Loans and advances to customers
5,289.3
4,859.7
Fair value adjustments for hedged risk
(21.9)
(13.2)
Intangible assets
13.8
12.8
Property, plant and equipment
34.0
31.5
Other assets
28.8
31.2
Total Assets
6,556.2
6,223.2
Liabilities
Shares
5,432.7
5,014.3
Deposits and debt securities
658.6
801.0
Derivative financial instruments
29.4
61.7
Other liabilities and provisions for liabilities
55.6
25.4
Subscribed capital
34.8
34.8
Reserves and equity
345.1
286.0
Total Liabilities
6,556.2
6,223.2
Asset class
2024
2023
%
%
Cash in hand and balances with the
Bank of England
42.8
45.1
Covered bonds
19.3
15.9
Residential mortgage backed securities
9.0
7.8
Gilts
19.2
6.7
Treasury Bills
5.0
15.5
Other
4.7
9.0
Total
100.0
100.0
Loans and advances to customers
The Society’s strategy to grow the core lending, which
includes prime residential and buy-to-let mortgages,
whilst winding down legacy portfolios continued
during 2024. Details of the movement in the
Society’s mortgage books is provided in note 12 to
the Annual Accounts.
The balance of loans and advances to customers after
provisions increased by £429.6m overall in 2024 (2023
£600.2m). Gross mortgage lending for 2024 increased
to £1.2bn, exceeding the previous record level of £1.1bn
set in 2023, whilst net core residential lending reduced
to £496.2m from £575.1m in 2023. The reduction
in the year was in line with lending targets as we
carefully managed the balance of capital, funding and
liquidity, with new mortgage applications increasing in
December 2024 to support increased 2025 net
lending targets.
Average loan to value increased during the year to
67.7% (2023: 65.9%) and average indexed loan to value
saw a small decrease to 62.9% (2023: 63.2%).
The main source of the change in valuation of the
Society’s equity release mortgages is market interest
rates. The Society economically hedges fair value
movements on the equity release portfolio due to
market interest rate movements using interest rate
swaps. The value of these swaps increased by £10.5m
resulting in a net gain of £3.7m (2023: £0.5m) in the
year included in the Income Statement.
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 in
fluence
future
lending with ’lessons learned’ fed back into
Lending Policy.
*includes mortgages acquired from Manchester Building Society
in 2023
The percentage of mortgages in arrears by 3 months or
more remains at low levels for 2024. Overall by number
of loans in arrears we have seen an increase of 0.2% to
0.9%, and by balance we have seen an increase of 0.3%
to 0.8%. We have redefined the basis o
f our arrears
definition to include interest only mortgages that
have passed the capital repayment date, which were
not included in prior periods as this more accurately
reflects the number o
f mortgages that are in arrears.
Excluding the interest only mortgage accounts, the
percentage of mortgages in arrears at 31 December
2024 was 0.8% for number of accounts in arrears by
3 month or more and 0.7% for balance of accounts in
arrears by 3 months or more. The comparatives in the
table above have not been restated for the changes in
arrears definition.
The mortgages acquired through our merger with
Manchester Building Society have significantly higher
arrears positions than the lending originated by the
Society, however they make up only £85.5m (2023:
£103.9m) of total lending.
Forbearance
The Society works closely with any homeowner
experiencing difficulties, o
ffering help and advice
on aspects of the situation. 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 Society’s 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 42
to the Annual Accounts for further details.
Arrears performance
3 months or more arrears*
By number of loans
By balance
2024
2023
2024
2023
%
%
%
%
Core lending
0.7
0.5
0.8
0.5
Legacy lending
5.5
4.8
1.4
1.2
Total
0.9
0.7
0.8
0.5
Loan portfolios
2024
2023
£m
£m
Core lending
Prime residential
4,524
4,020
Retail buy-to-let <£1m
385
390
4,909
4,410
Legacy Lending
Equity release
172
188
Specialist buy-to-let
6
13
Housing associations
179
212
Commercial
2
6
Other
19
24
378
443
5,287
4,853
Provisions
(7)
(8)
Other accounting adjustments
9
15
Loans and advances to customers
5,289
4,860
%
%
Average LTV%
67.7
65.9
Average ILTV%
62.9
63.2
29
30
Strategic Report
| Continued
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 2024 the
Society had 11 properties in possession (2023: 8) in
relation to residential loans, 1 of which being managed
by a Law of Property Act receiver (2023: 1) and there
were 2 legacy commercial loan properties (2023: 2)
being managed by a Law of Property Act receiver.
Funding
The Society manages its funding levels, mix and
duration carefully to ensure it has the required
resources in place to meet its liquidity 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 £418.4m during
2024 to £5.4bn. Wholesale funding, including
drawdown on Bank of England Funding schemes,
reduced during the year by £142.4m, following
repayment of £162m of drawings previously made
under the Bank of England’s Term Funding scheme
with additional incentives for SMEs (TFSME) during the
year. The balance of the Society’s TFSME drawings at 31
December 2024 was £359.3m (2023: £521.7m), which is
due to be repaid in 2025.
During the period, the Society took the opportunity
to diversify its funding portfolio, issuing £20m of Tier
2 capital eligible loan notes during the period (2023:
£nil), presented in Other Liabilities in the consolidated
Balance Sheet presented on page 29.
The ratio of shares and deposits to wholesale balances
moved from 86% / 14% in 2023 to 89% / 11% in 2024.
Reserves and Equity
The Group’s equity is predominantly made up of
£299.8m retained profits in the general reserve (2023:
£284.3m). In addition, £40m of Additional Tier 1 (AT 1)
instruments were issued during the period (2023: £nil),
which are recognised in other equity reserves.
Capital
The following table shows the composition of the
Group’s capital ratios at the end of the year. The
increase in common equity tier 1 capital relates to
the profit in the year, a
fter any applicable prudential
adjustments. The growth in additional tier 1 capital is
due to an external capital raise completed in December
2024. The total amount raised was £40m.
The increase in tier 2 capital relates to £20m additional
external capital raised in June 2024, leading to tier
2 capital of £54.3m at the year end. Any additional
tier 1 and tier 2 capital not eligible under the current
regulatory regime has been deducted, resulting in
£35.4m of eligible Additional tier 1 capital and £47.2m
of eligible tier 2 capital. This capital will become eligible
as the Society’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 2024. The total capital ratio was 15.7%
(2023: 14.1%); Tier 1 capital ratio was 13.7% (2023:
12.5%), and common equity tier 1 ratio was 12.2% (2023:
12.5%). As expected, the common equity tier 1 capital
ratio has reduced in the year, as growth in risk weighted
assets due to higher lending levels has only been
partially offset by retained earnings generated in the
year. The tier 1 capital ratio and the total capital ratio
have increased year on year, due to the external
capital raised.
Capital
2024
2023
£m
£m
Common equity tier 1 capital
Retained earnings
299.8
284.3
Other reserves and
prudential adjustments
(13.7)
(10.5)
286.1
273.8
Additional tier 1 capital
Perpetual capital securities
40.0
-
Ineligible additional tier 1
capital deducted
(4.6)
-
35.4
-
Total tier 1 capital
321.5
273.8
Tier 2 capital
Permanent Interest Bearing Shares
34.8
34.8
Subordinated loan notes
19.5
-
Ineligible tier 2 capital deducted
(7.1)
-
47.2
34.8
Total capital
368.7
308.6
Risk weighted assets
Liquid assets
34.2
42.0
Loans and advances to customers
1,990.4
1,813.4
Other assets
69.0
68.7
Counterparty credit risk
54.5
79.5
Operational risk
206.3
182.7
2,354.4
2,186.3
Capital Ratios
%
Common equity tier 1 ratio
12.2
12.5
Tier 1 ratio
13.7
12.5
Total capital ratio
15.7
14.1
UK Leverage ratio (excluding claims on
central banks)
5.2
4.8
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 2024, the
figure was 5.2% (2023: 4.8%). This is, and has remained
throughout 2024, well in excess of the regulatory target
of 3.25%. The improvement is due to the additional tier
1 capital raised 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 2024 (excluding
capital buffers) was £188.9m (2023: £185.8m). Further
detail on the Group’s capital is given in the Pillar III
disclosures available on the Society’s website.
Principal risks and uncertainties
The principal risks and uncertainties faced by the
Group are detailed in the Risk Management Report.
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 i
f we fail to prevent bribery or tax
evasion we can face criminal sanctions, an unlimited
fine and damage to our reputation. We there
fore 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 2024, the outlook remains
uncertain. When combined with the increasingly
fluid geopolitical landscape, predicting with certainty
how the external environment will evolve, and the
consequential potential impact on our Group, remains
somewhat challenging. We will continue to model
multiple forward-looking scenarios as well as closely
monitor the external conditions and refine our actual
growth and risk posture accordingly.
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
wider customer and client base connect to a better
financial
future.
On behalf of the Board
David Samper
Chief Financial Officer
28 February 2025
31
32
Being a Purpose-led, Member-
owned business means we can
think differently about how we
address the needs of our
customers and communities.
Whether it’s how we collaborate
with others, address the financial
needs of our communities, or
target support at those in need,
the benefits o
f a mutual approach
are clear.
difference
The Building Society
Our belief is that face-to-face financial services and
financial advice for all are an essential requirement
within any community.
Alan,
West Denton customer and Member
34
33
The Building Society difference
Vital Signs North East 2024 informs our strategic
community priorities, creating a clear link to our
Purpose including how we approach giving
and volunteering.
In 2024 our community focus remained on
five areas
of strategic priority, which are debt management,
homelessness, food poverty, environment and
employability. Across these areas of focus we seek to
adopt an inclusive approach, reaching people from all
backgrounds across our diverse regions.
Since 1995 the Newcastle Building Society Community
Fund at the Community Foundation has benefited local
causes with grant funding worth more than £2.7m.
We contributed an additional £1.1m to the Newcastle
Building Society Community Fund during 2024,
building the endowment to around £3.5m and
increasing the level of funding which will be made
available to charities in our regions for generations
to come.
In addition, in 2024 the Newcastle Building Society
Community Fund awarded 24 grants, worth a total of
more than £140,000, reaching more than 200,000
people in areas around our branch network.
In the North West, we’re pleased to have already
committed to working with and supporting two
amazing charities as part of our inaugural investment in
the region: Forever Manchester, and Empower Salford
Youth Zone, donating £100,000 to each charity in 2024.
One of our most impactful initiatives is our partnership
with Citizens Advice Gateshead who deliver our
‘Helping Hand’ service for Members and colleagues. By
providing easy-to-access, free-to-use guidance, advice
and practical assistance across a wide range
of topics, we’ve supported nearly 200 individuals,
helping to unlock more than £300,000 in additional
income through advice on eligibility for bene
fits and
welfare support.
Colleagues play a vital role in driving positive change
in our communities. Our volunteering-friendly
policies encourage individuals and teams to spend
time on local good causes aligned with our strategic
community priorities of food poverty, homelessness,
debt management, employability, and sustainability.
Volunteering with strategic focus helps to create
meaningful impact and can include use of specialist
skills or the time spent supporting local good causes.
More than 6,000 colleague hours were volunteered on
activities linked to our strategic themes during 2024,
ranging from support for local food banks to time
spent on charity boards and included support for the
Newcastle Mela festival in the summer, and a winter
fundraising campaign in support of FareShare North
East which helped to raise more than £14,000 to enable
the purchase of a new van for delivery of surplus food
across the region.
All this means that the value of our community support
in 2024 was more than £1.9m.
Better with branches
Since 2015, more than 6,100 bank branches have
closed across the country, making it difficult for
ordinary people to access financial services and
damaging our high streets. That trend of bank branch
closures continued in 2024, with an additional 300+
closure announcements, stretching to every corner of
the UK. However, the inconvenient truth for the banks is
that almost everyone will come to value access to face-
to-face
financial services at some point in their lives.
We take a different approach. Our belief is that face-to-
face
financial services and financial advice
for all are an
essential requirement within any community.
By listening to our Members, and responding directly
to their needs, it is our view that rather than close
branches and force people online, the better answer is
to offer a service which blends the best of digital and
personal services.
This leads us to explore new and different ways of
thinking when it comes to expanding our branch
network. In the past ten years we’ve invested around
£10m in our branches, opening in new locations,
innovating in design and operating models and
restoring financial services in communities abandoned
by the banks.
In 2024 we created our fi
fth community partnership
branch by relocating our North Shields branch to share
space with YMCA North Tyneside, an award-winning
charity. Alongside their popular community café and
gym, we’re able to support their excellent work which
includes education, youth and community work, and
provision of supported accommodation.
Investment in Hartlepool and Middlesbrough upgraded
branch facilities to create two new spaces for local
charities and community groups to meet – free of
charge. More than half our branches now have a
community room, providing a dedicated bookable
space with refreshments available to Members and
non-members. During 2024, more than 200 different
charities and local groups used our community rooms
as they become an increasingly useful part of the
social fabric in their communities, bringing people
together and giving people another reason to visit their
high street.
We also opened a brand new branch in Pickering,
a town which was due to become unable to access
a local bank in 2025. Through our financial advice
subsidiary, Newcastle Financial Advisers, we have had
a modest office presence in Pickering since 2019 but
in 2024 we opened a new branch on the high street,
maintaining access to financial services and putting our
team of
financial advisers within the new branch. The
installation of a free-to-use multi-bank kiosk in Pickering
means customers of any bank, even if they aren’t
customers of the Society, can access their current
account for cash withdrawal and deposits.
Throughout 2024, work continued on the creation
of our Monument
flagship branch in Newcastle city
centre. Consisting of
five floors spread over 8,400
square feet, the branch will house a full range of
branch services, a huge flexible community space,
plus meeting, events, and working spaces. Previously a
retail unit, much of the space will be brought back into
community usage for the
first time in decades when it
opens in 2025.
In the North West, we’ve committed to opening a
Manchester city centre flagship branch in 2025, which
will feature community space, meeting space and
advice space as well as all the facilities you would
expect to find in a building society branch. Over time
we will expand the branch network across Greater
Manchester’s towns and the wider North West.
Our ongoing investment in branch services helps to
create value which extends far beyond the transactions
that take place at the counter.
Accessible financial planning is an essential
feature
of our branch network, with a professional quali
fied
financial advisor in each branch and no minimum
level of customer investment required. This radically
inclusive offer means we aim to provide personalised
advice in our communities for anyone, at every stage
of life.
Branch colleagues are also key to the provision of vital
financial education in our communities, much o
f which
is done in collaboration with our partners at Newcastle
United Foundation. Branch colleagues delivered more
than 200 different financial coaching sessions or scam
awareness talks during 2024, and visited more than 50
schools, reaching nearly 5,000 pupils. In addition, 76
colleagues helped deliver 33 different employability
sessions, reaching more than 5,000 participants.
In addition, branch colleagues are embedded and
collaborating within their local communities, helping
direct community grants from the Newcastle Building
Society Community Fund to where they’re needed
most, volunteering, and fundraising. Community
groups in turn can make use of branch space for
meetings and access a range of
financial and non-
financial support.
Understanding regional priorities
Vital Signs North East 2024 is a collection of reports
created by the Community Foundation Tyne & Wear
and Northumberland (the Community Foundation)
which explore the biggest issues facing the North East.
By ‘taking the pulse’ of the region, the reports aim to
identify our common challenges and highlight the
opportunities to respond collaboratively.
Our support for Vital Signs North East 2024 includes
helping to bring together more than 300 leaders from
business, charity and the public sector at a series of
events to share the findings, spark conversation and
drive action. At close to 100 subsequent ‘On The Table’
events nearly 1,000 people came together to chat
through the issues which mean the most at a grassroots
level, providing feedback and ideas.
Mairi, Julie, and Kim,
Whitley Bay customers and Members
36
35
Durham,
County Durham
Report
Sustainability
38
37
Sustainability Report
Climate-related financial disclosures
Introduction
Our climate-related disclosures are structured around four key pillars and aim to provide consistent disclosures and
information on the Society’s exposure to, and management of, climate risks and opportunities. The four pillars are:
Governance
Strategy
Risk Management
Targets and Metrics
Governance
The Society has introduced an appropriate governance structure, which identifies and manages the risks and
assesses the opportunities in relation to climate change. The Society has designed the governance structure to
be sufficient for the nature, scale, and complexity of its operations. As the Society has an exposure to climate-
related risk across its operations, it ensures that climate-related considerations are embedded into its approach to
governance so that appropriate decisions are made to secure a strong financial
future for the Society as well as for
our Members and customers.
The governance process for assessing and managing climate-related risks and opportunities is consistent with our
established risk governance framework. Climate-related risks identi
fication and quantification re
freshes are carried
out on an annual basis and feed into our Internal Capital Adequacy Assessment Process (ICAAP) and Internal
Liquidity Adequacy Assessment Process (ILAAP) assessments.
Risks and opportunities are being incorporated within the Society’s risk management frameworks, with this being
complemented by climate specific processes where relevant.
Our climate-related governance structure is as follows:
The Board is ultimately responsible for the
governance of the risks and opportunities in
relation to climate change;
The Society’s Group Risk Committee is responsible
for ensuring climate-related risks 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;
-
Enterprise Risk Committee for climate
risks to business operations (including
operational resilience);
-
Credit Risk Committee for climate-related risks to
the Society’s secured mortgages; or
-
Assets and Liabilities Committee for climate-related
risks to capital or liquidity.
The Society’s Executive Committee chaired by the
Chief Executive is responsible for overseeing the
identification and management o
f climate-related
risks and opportunities. They work pro-actively
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;
Throughout 2024, the Executive Committee
discussed the following risks based on detailed
investigations and modelling performed by
the Society;
-
The physical risk exposure of
flooding,
subsidence and coastal erosion associated to our
lending portfolio;
-
The transitional risk exposure of energy
performance certi
ficate (EPC) ratings linked to
our lending portfolio; and
-
Short term recommendations on business climate
adaptation to address the short-term risk and
opportunities identified.
Newcastle Building
Society Group Board
Group Risk
Committee
Credit Risk
Committee
Executive
Committee
Assets and
Liabilities Committee
Model Risk
Committee
Anisa,
colleague
40
39
Sustainability Report
| Continued
Strategy
The impact of climate change has the potential to
be significant to the business, our Members and
customers.
As a result, the Society continues to strengthen its
strategic focus on sustainability and climate risk
management activity.
Climate risk can be separated into two key themes:
physical risk and transition 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 toward a low-carbon economy.
The most significant risks are
focused on the impact of
climate change on our residential mortgage portfolio.
We have undertaken scenario analysis which shows the
forecast credit losses will primarily come from physical
risks associated to flooding (
from
fluvial, pluvial and
tidal sources), as well as subsidence and coastal
erosion, but losses are relatively low. The table below
summarises the key climate risks we have identified and
their potential impact on the Society.
These are split into transitional and physical risk and the
time horizon assigned to each.
Short term: <5 years this aligns with the Groups
financial planning cycle
Medium term: 5-15 years, this covers the main time
horizon associated with transitional risk
Long term: 15+years, this covers the main time
horizon associated with physical risk and our
climate risk stress testing horizon.
Climate change is relevant to the Society’s success
as the physical effect of climate change and the
transition to a low carbon economy continues to create
unforeseen risks and opportunities. We also recognise
that we have a corporate and ethical responsibility to
address any negative impact we have on the wider
environment because of our business operations.
Our climate strategy is built around our Society
Purpose, which includes “Caring for our environment
and ensuring sustainability for future generations” as
one of its
five strategic pillars.
The Society’s climate strategy prioritises those areas
that may pose the most material risks to its stability and
that align to our Purpose.
The Society has quantitative credit risk appetite limits
to manage the financial risk
from climate change. These
have been set in relation to both physical and transition
risks. We report on and monitor climate risk exposures
for
flooding, subsidence and coastal risks, as well as
monitoring EPC status of our mortgage book to gain
better insight into the opportunities we may have to
reduce carbon emissions and our position against risk
appetite limits.
As well as identifying the risks associated with climate,
we have also identified opportunities that we are
considering, which supports the transition to a net
zero economy.
Green finance products:
we are looking for ways to
develop financial products to help Members reduce
their carbon footprint, with a focus on products which
support members’ purchases of new, more energy
efficient homes.
Policy and collaboration:
we are reviewing how we
interact with third party suppliers that share similar
sustainability goals. We are also engaging with key
organisations to support us in the journey towards Net
Zero and have become signatories to the United Nations
Principles for Responsible Banking in 2024.
Communication:
we are engaging with colleagues and
Members to increase understanding of climate related
risks and the importance of the transition to net zero.
To ensure the strategy remains relevant the Society
conducts annual stress tests, scenario analysis and
impact exercises focusing on hypothetical but plausible
scenarios, to ensure that strategic deliverables are
appropriate, it also enables the Society to assess its
current response to, and to identify opportunities to
strengthen its resilience to, climate-related risks. This
activity is aligned to the Society's planning cycle and
further scenario analysis is completed during the annual
ICAAP assessment.
As part of this exercise the Society makes qualitative
estimates of medium and long-term climate-related
capital needs relative to the capital needs disclosed
by the largest UK banks as part of the 2021 Climate
Biennial Exploratory Scenario. Our response assessment
considers the likelihood of the risk materialising and
the expected impact on the Society. By doing so, it
assesses the materiality of the type of climate-related
risks the Society is exposed to, which informs
business response and actions to an acceptable
residual risk profile.
We have undertaken scenario analysis to understand the
impact of climate change on our residential mortgage
portfolio. The scenarios used broadly align to the Bank
of England CBES scenarios and the Intergovernmental
Panel on Climate Change (IPCC) which set out
representative concentration pathways (RCPs) which
reflect different levels o
f global greenhouse gas
emissions. The scenarios used can be found in the
table below.
Area
Time horizon
Risk description
Risk impact
Credit Risk – potential to increase mortgage defaults, losses and capital requirements due to:
Physical
Medium
Rising insurance costs
Impact on customer
affordability and therefore
impacts borrower’s ability to
repay the loan
Medium and long
Mortgage asset impact
Increased impact and more
regular occurrences of
physical risk perils such as
flooding, subsidence and
coastal erosion, leading to a
decrease in property values
Transition
Short and medium
Cost of home energy
efficiency improvements:
Impact on customer
affordability due to higher
running costs, and therefore
impacting the borrower’s
ability to repay the loan
Medium and long
Mortgage asset impact
Less energy efficient
properties becomes less
desirable leading to a
decrease in property values
Other risks
Physical
Medium
Operational risk, operational
resilience and supply chain
disruption
Increased costs due to
damage to our business
premises from physical
risk sources and potential
interruption to the provision
of goods and services.
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
Medium emissions
All signatories of Paris
accord deliver on
commitments.
High emissions
Business as usual
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
41
42
Sustainability Report
| Continued
Scenario analysis outcome
Our climate risk scenario analysis continues to evolve
as our knowledge, experience and access to data
grows. Damage to mortgage assets is the key physical
risk that we consider in the scenario analysis. The
physical risks included are flooding, subsidence and
coastal risk, with the focus being on the medium
term 2050 scenario as that covers our maximum
mortgage term of 40 years. Scenario analysis
undertaken combines both quantitative and qualitative
assessments covering both physical and transition risk.
Scenario analysis output for the residential mortgage
portfolio show that expected credit losses are expected
to rise under each scenario. The more material effects
from climate occur towards 2050, which is our medium
term no action scenario.
Risk Management
The Society recognises the exposure to risks and
opportunities presented by climate change across both
its physical operations (e.g. due to physical risks to its
property estate) and its financial operations (due to
transitional risk associated with financial assets such
as mortgages) and is committed to managing those
risks effectively.
However, climate change is a complex and an
inherently systemic issue and it is particularly difficult
to model given the long-term, horizon nature of
the exposure and the potential implications cutting
across a number of key areas of risk such as credit,
operational, liquidity, market and operational
resilience. We are therefore focusing on short term
exposures to the Society and prioritising actions to
mitigate and adapt the business to respond to the
changing environment.
Overseeing day to day robust and efficient
management of climate-related risk belongs to the
Chief Risk Officer and the risk senior leadership team.
The Head of Environment and Sustainability works
closely with the Chief Risk Officer, and the risk senior
leadership team to support their roles ensuring that
they consider the risks associated with all elements
of climate, environment and sustainability and that
regulatory and legislative obligations are being ful
filled
where internal capability allows.
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 in
forms
our response to emerging risks or threats.
This approach includes an internal assessment of the
Society’s exposure to key risks highlighted within HM
Government’s National Risk Register.
The Society has developed specific climate-related
risk appetite statements and reporting as a component
within the Society’s risk management framework.
Climate change risk is considered as an emerging risk
by the Society given the uncertainty in relation to the
exact nature and timing of any impact on strategy and
operations.
Processes for identifying and assessing
climate-related risk
The business is committed to increasing our controls
around identification, assessment, management and
monitoring of climate change risk. With respect to
mortgage credit risk, discussions have taken place
through governance channels on how we can best
identify key climate risk and how we can best manage
lending exposures. Climate risk is also managed
in other areas, and climate risk scenario analysis is
included within our ILAAP, covering both time and
greenhouse gas emission scenarios. Biannual reporting
is produced in relation to mortgage portfolio exposures
to risks arising from
flooding, subsidence and coastal
risk. Reporting also covers our exposure in relation
to energy efficiency. This is reported to relevant
committees, under the governance framework. The
Enterprise Risk teams are responsible for providing
oversight and challenge to the first line. Internal
Audit Services provide independent assurance on the
effectiveness of how we manage climate risk.
Processes for managing climate-related risk
The Society has set quantitative credit risk appetite
limits to manage the financial risks
from climate
change. Limits have been set for physical and transition
risks. We monitor our climate risk exposures where
we continue to monitor EPC transition risk to track our
mortgage portfolio.
How processes for climate-related risk are integrated
into overall risk management
Climate risk management is embedded within the
Society’s risk management processes. The Society has
a three lines of defence framework in place to both
identify and manage business risks.
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
impact of the event.
Internal Capital Adequacy Assessment
Process (ICAAP)
In 2024, as part of the Society’s ICAAP we conducted
three scenarios linked to climate-related risk, with the
focus being on the medium-time horizon, which covers
our maximum mortgage term of 40 years. We will
continue to include climate-related scenarios within the
ICAAP to inform our capital planning.
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
business. 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
Building on the business resilience as summarised
above, 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 so any future carbon
emissions taxes are not expected to materially impact
the Society. Meanwhile, the Society’s mortgage book is
a dynamic asset and as such medium-term risks such
as additional 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.
Metrics and targets
The Society is committed to aligning to a science-based
pathway to support in becoming a net zero sustainable
Society. We are also committed to contributing to
the UK Government’s greening of UK homes agenda
and aim to reduce our financed emissions (emissions
relating to mortgage properties) accordingly in line
with the UK Government’s agenda whilst supporting our
Members and customers in line with our strategic goals.
In addition to monitoring key metrics associated with
climate change, the Society is working hard to reduce
absolute emissions, as measured by our carbon balance
sheet, in order to bring us closer to being net zero.
Metrics and targets used to monitor physical and
transition risk metrics
The metrics we have chosen to monitor these risks are:
Properties classed in the highest flood
risk category;
Properties classed 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 the 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.
Physical risk metrics
In 2024, we 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 table below:
Current Society physical risk exposures
2024
Physical risk
Number
Exposure £m
% book
UK %
1
Properties classed in the highest
flood risk category
2
457
63.4
1.4%
1.7%
Properties classed in the highest
subsidence risk category
3
1,399
375.9
4.4%
6.5%
Properties classed in the highest
coastal risk category
4
-
-
-
-
1.
UK benchmark refers to both mortgaged and unmortgaged properties. Flood, subsidence and coastal data covers residential
and BTL
2.
Twinn current flood risk rating (81-100)
3.
Terrafirma current subsidence risk score (10-15)
4.
Terrafirma current coastal risk score (100)
43
44
Sustainability Report
| Continued
Energy performance certi
ficates (EPCs)
Domestic EPCs are banded from ‘A’ to ‘G’ where ‘A’ is the most energy efficient in terms of likely 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.
Current Society physical risk exposures under RCP 8.5 in 2050
Physical risk
Number
Exposure £m
% book
Properties classed in the highest
flood risk category
718
99.6
2.4%
Properties classed in the highest
subsidence risk category
1,422
379.9
4.4%
Properties classed in the highest
coastal risk category
2
0.3
0.01%
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%
14%
30%
39%
12%
3%
1%
0%
11%
30%
39%
15%
4%
1%
EPC Rating
SAP Score
A
92+
B
81 - 91
C
69 - 80
D
55 - 68
E
39 - 54
F
21 - 38
G
1 - 20
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 2.4% o
f
the current book. Overall, the risk remains relatively low and below the UK average. The increases seen from other
physical risks are less pronounced as seen in the next table:
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 home’s
standard on new builds in 2025. 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’ which is
consistent with the rest of UK. The Society has a slightly higher skew in terms of EPC, with 45% of properties having
an EPC rating of C and above, against the UK at 40%.
This table is inclusive of both valid and expired EPCs. Unknown covers both properties which do not have an
EPC or have not been matched in the open register. This is due to EPC being captured on Oct 24 for England and
September 24 for Scotland. % Book based off exposure.
Risk exposure to actual EPCs
Year end 24
EPC Category
Volume
Exposure £m
% book
A
156
33.2
0.7%
B
4,131
763.3
15.1%
C
7,155
1,118.3
22.1%
D
9,339
1,484.5
29.4%
E
2,910
489.8
9.7%
F
563
103.2
2.0%
G
129
25.0
0.5%
Unknown
7,455
1,034.8
20.5%
45
46
Sustainability Report
| Continued
Cramlington,
Northumberland
This report (including the Scope 1 and scope 2
consumption and CO2e emissions data) has been
developed and calculated using the GHG 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); Environmental Reporting Guidelines:
Including Streamlined Energy and Carbon Reporting
Guidance (HM Government, 2019).
Government Emissions Factor Database 2023 version
1.1 has been used, utilising the published kWh gross
calorific value (CV) and kgCO2e emissions
factors
relevant for the reporting period 1 January 2024 to
31 December 2024.
The Society’s scope 1 direct emissions (combustion of
natural gas, refrigerants, and transportation fuels) for
this reporting year are 169.48 tCO2e, resulting from
the direct combustion of 919,284 kWh of fuel. This
represents a carbon increase of 2.2% from last year,
ending December 2023.
Scope 2 indirect emissions (purchased electricity) for
this reporting year are 494.03 tCO2e, resulting from the
consumption of 2,340,337 kWh of electricity purchased
and consumed in day-to-day business operations. This
represents a carbon reduction of 1.5% from last year,
ending December 2023. Head office uses green tari
ff
renewable electricity and we are assessing our branch
network in line with the same approach.
The Society’s operations have an intensity metric of
0.051 tCO2e/ m2 for this reporting year. This represents
a reduction in the operational carbon intensity of
0.048% from last year, ending December 2023.
We continue our work to understand the requirements
in all relevant scope 3 categories, aiming to get a
clearer view of our baseline emissions across relevant
categories and prioritising our efforts to address the
largest negative emitters.
Outlook
The Society has recently become a signatory to the
United Nations Principles for Responsible Banking
(UNPRB) and a member of the United Nations
Environment Programme Finance Initiative (UNEP FI).
This not only demonstrates our commitment to our
journey to Net Zero, however also allows us access
to increased resources and exceptional support in
planning all forward-looking steps required.
We have also adopted a number of UN Sustainable
Development Goals. Being a responsible and
sustainable business, these goals are firmly embedded
in our Purpose, our Strategy and our ongoing activity in
supporting the communities we serve.
As part of our commitment to UNPRB we will publish
our initial Net Zero gap analysis, our related proposed
sustainability milestones and enhanced mapping of
our adopted Sustainable Development Goals within
extended disclosures in our 2025 Report & Accounts
as well as separately in our sustainability commitments
and climate-related disclosures, which will be published
by the 2nd quarter of 2026.
SDG8 – Decent work and
economic growth
We will aim to promote sustained,
inclusive and sustainable economic
growth, full and productive
employment and decent work for all
SDG3 – Good health and
wealth being
We will aim to ensure healthy lives and
promote well-being for all at all ages
SDG11 – Sustainable cities
and communities
We will aim to make the cities, towns
and communities we support inclusive,
safe, resilient and sustainable
SDG4 – Quality education
We will aim to ensure inclusive
and equitable quality education
and promote lifelong learning
opportunities for all
SDG13 – Climate action
We will aim to take urgent action
to combat climate change and
its impacts
SDG5 – Gender equality
We will aim to achieve gender equality
and empower all women and girls
Carbon Balance Sheet
* 2023 natural gas figures have been restated as improved consumption data has become available.
**2023 electricity figures have been restated as invoices have been rebilled and improved consumption data has
become available.
*** Fleet was changed from 100% diesel to 75% electric vehicles.
Greenhouse Gas Emissions Report
2024
2023
% change
Energy consumption (kWh)
Natural gas
895,384
856,200*
4.58
Electricity
2,340,337
2,376,164**
(1.51)
Transport
468,038***
377,933
23.84
Total
3,703,759
3,610,297
2.59
Greenhouse gas emissions in tonnes of carbon dioxide equivalent
Natural gas
163.77
160.47*
2.06
Electricity
484.57
492.04**
(1.52)
Transport
103.94***
85.61
21.41
Total
752.28
738.12
1.92
Intensity metric
tCO2e per sq. M
0.05
0.05
-
48
47
Sam,
North Shields
Customer and Member
Governance
50
49
Appointed:
August 2021.
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 be
fore this spent 14 years in
corporate banking in Barclays Bank plc.
He was a soldier for 12 years with the Royal Green Jackets and bene
fited
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. During 2024 he was Chair of the Group Technology and Change
Committee. Until September 2024, he was Chair of Newcastle Financial Advisers Limited.
James is a also Pro-Chancellor of Sunderland University (2016); made an 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.
Appointed:
January 2014
Experience:
With over 30 years’ experience in the mutual sector, Andrew has 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 healthy, customer focussed cultures, and
proudly drives our Society’s ongoing commitment to equity, diversity and inclusion.
Other roles:
Andrew was appointed a Director and Chair of Newcastle Financial Advisers Limited in September
2024.
Andrew is a Board member of the North East Chamber of Commerce and the Community Foundation
serving Tyne & Wear and Northumberland.
Appointed:
June 2023
Experience:
Rory brings to the Board his extensive experience as a senior executive, Board member and advisor
to leaders and organisations in a range of industries.
He previously spent six years at John Lewis & Partners, including three years on the Management Board and as a
standing attendee of the Audit and Risk Committee.
Reflecting the Society’s values, Rory’s passion
for purpose, society and leadership sees him devote his time to a
number of causes. He is a former independent member of the anti-poverty charity Joseph Rowntree Foundation;
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.
Other roles:
Formerly, Rory spent 12 years as a senior executive in Lloyds Banking Group. He is also a member of
the Society’s Remuneration Committee and the Nominations and Governance Committee.
Appointed:
April 2019
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 o
f 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. He is also Chair of the Society’s subsidiary, MBS (Mortgages) Limited.
Our Directors
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
36 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.
James Ramsbotham
Chair
Andrew Haigh
Chief Executive
I’m passionate about harnessing our Society’s connection to Purpose.
My experience enabling businesses and leaders to unlock this
potential will contribute to achieving our ambitions as a
Purpose-led organisation, making a meaningful difference beyond
the bottom line.
Adam Bennett
Non-Executive Director
Rory Campbell
Non-Executive Director
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Our Directors
| Continued
Appointed:
January 2025
Experience:
Moorad was a Non-Executive Director on the Boards of Recognise Bank Limited, Loughborough
Building Society and Wandle Housing Association before joining Newcastle Building Society, where his
experience within the financial services sector will help to in
form decision making at Board level.
Other roles:
Moorad is Honorary Professor at University of Kent Business School, Chair of the Audit & Risk
Committee at Goldsmiths, University of London, and an independent member of the Board Risk Committee at
the Brazilian bank Nubank. He is also a member of the Society’s Group Risk Committee.
Prior to that he was Treasurer, Corporate Banking Division at the Royal Bank of Scotland, and worked in
wholesale banking and markets roles at several high-profile banks.
He is a Fellow of the Chartered Institute of Securities & Investments,
the London Institute of Banking and
Finance,
and the Global Association of Risk Professionals, a Liveryman at the Worshipful Company of
International Bankers and Author of the book “The Principles of Banking”.
It is a great privilege to join the Board at Newcastle Building Society.
The building society movement is part of the heritage of this country,
and I am looking forward to working with everyone here as we all do
our part to keep the Newcastle moving onwards and upwards!
Professor Moorad Choudhry
Non-Executive Director
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I hope to use my commercial experience combined with a passion for
helping others succeed to help guide the Society in delivering on its
Purpose and fulfilling its commitments to its communities.
My strong credit and risk management background is particularly
valuable to informing decisions made in my role as Chair of the
Society’s Group Risk Committee.
Appointed:
August 2021*
Experience:
With 15 years working at the most senior levels in finance and risk at two o
f the largest mutuals,
her time as Chief Financial Officer at Coventry Building Society and Group Risk Director at Nationwide Building
Society position her well to deliver significant building society knowledge and a wealth o
f valuable experience
to the Society.
Michele spent nine years as Trustee and Treasurer of the Bow Arts Trust and mentored for The Aspire
Foundation, which supports women’s development internationally. She currently chairs The Line Public Art
Walk charity. Her wide-ranging career has also incorporated roles with global insurer Aviva, accountants PwC
where she was a Partner, and IT services provider, ICL.
Other roles:
Michele is a Non-Executive Director, member of the Risk and Compliance Committee and Chair of
the Audit Committee at IQUW Syndicate Management Limited. She is also a member of both the Society’s Audit
Committee and Group Risk Committee.
*Michele was originally appointed to the Board in August 2021; however, she did not stand for re-election at the
2024 Annual General Meeting (AGM). Due to a change in circumstances, Michele informed the Board that she
was able to continue in her role as a Non-Executive Director. The Board appointed her to a casual vacancy on 29
April 2024; Michele will be standing for election to the Board at the 2025 AGM.
Appointed:
August 2017
Experience:
Bryce is a highly experienced Director who has operated at Executive Committee and Board level in
a number of leading UK
financial services businesses.
Adding a genuine breadth of commercial and retail banking expertise, Bryce helps to shape the Group’s overall
strategy. His extensive industry knowledge and business acumen assist the development of the Group.
The majority of Bryce’s career has focused on corporate and commercial banking. He was Managing Director
of Commercial Banking at A&L/Santander, before joining Nationwide Building Society in 2009 as a Director
heading its Commercial Division, where he managed a £22bn commercial lending portfolio and the society’s
business savings accounts before heading Corporate Affairs.
He has a deep understanding of the mutual sector, having spent nine years working for the UK’s largest building
society, the last three as Corporate Affairs Director. He also co-founded a UK SME bank which received its full
banking licence in 2021.
Other roles:
Bryce is Chair of the Society’s Group Risk Committee and a member of the Board of
Newcastle Strategic Solutions Limited. During 2024 he was a member of the Society’s Group Technology and
Change Committee.
Appointed:
January 2018
Experience:
Stuart became the Chief Commercial Officer in January 2025 having previously spent two years
as Managing Director of Newcastle Strategic Solutions Limited (NSSL). NSSL is a Group subsidiary and the UK’s
leading provider of outsourced savings solutions, managing over 1.7m savings accounts on behalf of its clients.
He has over three decades’ experience working in the financial services sector, including at Virgin Money, RBS
International and NatWest.
Stuart has extensive experience in leading large teams with a focus on delivering an outstanding experience
for colleagues and customers which will be a major focus in his new role where he will be accountable for the
Member experience across Newcastle Building Society, Manchester Building Society and Newcastle Financial
Advisers Limited.
Other roles:
Stuart is a Director of Newcastle Strategic Solutions Limited, Newcastle Financial Advisers Limited
and spent four years on the Board of the national High Streets Task Force. During 2024, Stuart was also a
member of the Society’s Group Technology and Change Committee.
Michele Faull
Non-Executive Director
Bryce Glover
Non-Executive Director
The UK savings and mortgage market continues to go through significant
change and I am proud of the part our colleagues have played in
supporting our Members through such dynamic and uncertain times.
Stuart Miller
Chief Commercial Officer
Our Board members skills and experience contributes to delivery of a long-term and sustainable Society, details of
which are found in their biographies.
Appointed:
July 2017
Experience:
Anne’s extensive UK and international board-level experience working with both FTSE 100 and
independently owned companies, in both regulated and non-regulated businesses, reinforces the Board’s broad
range of skill and competency.
Her experience spans sectors including financial services, retail, telecommunications, manu
facturing and
consumer. Anne’s breadth of knowledge, skills and qualities combines strategic leadership and deep people,
culture and organisational transformation expertise with a solid understanding of governance, control and risk.
She has held executive roles at Hallmark Cards, Lloyds Banking Group/HBOS, Safeway and Thus Plc.
Other roles:
Anne is a trusted executive coach and adviser to Boards and Directors in diverse businesses in the
UK and the US. She also chairs the Remuneration Committee and is a member of the Society’s Audit Committee.
She is also a Director of Newcastle Financial Advisers Limited.
Appointed:
January 2019
Experience:
Mick brings significant accountancy experience with a deep knowledge o
f 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:
Mick 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.
Mick chairs the Society’s Audit Committee, as well as being a member of the Society’s Remuneration
Committee. During 2024 he was a member of the Society’s Group Technology and Change Committee. Mick
also chairs the Newcastle Building Society Pension & Assurance Scheme Board.
Our Directors
| Continued
Anne Shiels
Non-Executive Director
As the Society continues to grow, the Board leans on my track record
of leading large people functions and experience facilitating
transformative organisational change to develop a broader view on
matters affecting the Society and assist in developing people
strategies, including our approach to culture, talent, succession
and reward.
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.
Mick Thompson
Deputy Chair and Non-Executive Director
Outgoing Directors
David Samper
Chief Financial Officer
David Samper, who has served as Chief Financial Officer for over six years has announced that he will be leaving
the Society and is not therefore seeking re-election to the Board.
David has made a significant contribution
to the Society's progress during his time with us, not least in 2024 when he led the successful projects to
transform our
finance systems and the raising o
f Tier 2 and Additional Tier 1 capital to support the Society’s
ongoing plans for investment and growth. We thank David for his contribution and wish him well for the future.
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I’m passionate about driving meaningful change within organisations,
dedicating my career to influencing workplace culture, fostering
high-performing environments, and ensuring the customer / client
remains at the heart of every decision.
Appointed:
December 2024
Experience:
Amanda is a transformative business leader with proven Board, regulator and investor exposure.
She plays a key role on the Group’s executive team leading the operations, processing, technology and change
functions as Chief Operating Officer.
Amanda brings over 30 years’ experience working in the financial sector. Her success in developing and
implementing change strategies to align with business objectives will be key to the development and delivery of
the Society’s Strategic Plan and the overall Group strategy.
With a wealth of experience, most recently from the UK's leading platform for private investors, Hargreaves
Landsdown, where she was Chief Operating Officer, Amanda also held senior positions at Barclays Bank PLC,
leading operations in the UK including Northern Ireland, Scotland and North Wales.
Other roles:
Amanda was a former Director on the Board for Hargreaves Lansdown Asset Management and is
Chair of the Society’s Transformation Steering Committee, a Board Director of Newcastle Strategic Solutions
Limited and a member of the Society’s Enterprise Risk Committee.
Amanda Shepherd
Chief Operating Officer
Directors’ Report
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 o
f 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, 40 to 42, 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 therea
fter, 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 per
formance 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 36, 43 and 44 (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 su
fficient 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 have
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 2027. The assessment took account of the
Group’s and Society’s principal and emerging risks 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 pro
fitability, capital and liquidity
positions. It also considered the most recent ICAAP
and ILAAP stress tests, complemented by further stress
tests and forecasts completed at December 2024,
to ensure the viability of the Group and Society even
in times of severe stress. The most signi
ficant stress
scenario which was considered included an increase
in unemployment to 8.5% and house price falls of 30%
over the period 2025 to 2027.
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 2027.
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, 40 to 42, set
out the metrics associated with the key risks including
sensitivity analysis and exposure level.
Mortgage arrears
As at 31 December 2024, there were 42 cases (2023:
34) where payments were 12 months or more in arrears.
The capital balance of these loans was £4.3m (2023:
£3.8m). The total amount of arrears on these loans was
£0.6m (2023: £0.6m).
Political and charitable gifts
Community funding, including charitable donations
and colleague fundraising, totalled £1,535,731 in 2024
(2023: £357,296).
The organisations that the Group supported and the
corresponding donations made in 2024 included
£1,060,637 to the Newcastle Building Society
Community Fund at the Community Foundation Tyne
& Wear and Northumberland, £100,000 to the Forever
Manchester Community Foundation, £100,000 to
Salford Youth Zone and £60,000 to the Newcastle
United Foundation.
In 2024, 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 £29,959 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 10,000 hours of
support to local communities.
The Group has not made any political donations during
2024 (2023: £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 2024, the number of creditor days was
27 (2023: 27 days).
Directors
At 31 December 2024, 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,
Michele Faull, Bryce Glover, Andrew Haigh, Anne
Laverack (business name: Anne Shiels), Stuart Miller,
David Samper, Amanda Shepherd and Mick Thompson.
Stuart Lynn retired from the Board on 24 April 2024.
David Samper will be stepping down as a Director
before the 2025 Annual General Meeting.
At the Annual General Meeting, to be held on 23 April
2025, all of the current Directors will offer themselves
up for either election or re-election, with the exception
of David Samper. In addition, Moorad Choudhry, who
joined as a Non-Executive Director on 2 January 2025,
will be standing for election.
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.
The Directors present their Annual Report and Accounts and Annual Business Statement for the year ended 31
December 2024, 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.
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Statement of Directors’ Responsibilities
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 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 o
f 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 o
f 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 (the FCA) 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 in
formation
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 Accounts, which have been
prepared in accordance with IFRSs, give a true and
fair view of the assets, liabilities,
financial position
and profit o
f the Group and pro
fit o
f 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 28 February 2025 and is signed
on its behalf by:
On behalf of the Board
James Ramsbotham
Chair
28 February 2025
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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 Society’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 Society’s activities into new
business or geographical areas; and approving
any decision to cease all, or a material part, of the
Society’s business.
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 delivered are
central to the Group’s culture and purpose and are
embedded within the Group; and overseeing and
setting the tone for diversity and inclusion within
the Group.
Structure, capital and liquidity
– approval of the
Society’s Internal Liquidity Adequacy Assessment
Process (ILAAP); approval of the Society’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
final annual results; approval o
f
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 o
f the going
concern and business viability review following
review and approval by the Audit Committee;
approval of any signi
ficant 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 Society and actions to address these
risks within the Society’s overall business strategy
and risk appetite. The Board delegates oversight
of risk management to the Society’s 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 Audito
r – 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 Society’s
Remuneration Committee.
Introduction
Corporate governance is the system of rules and
practices by which the Group is directed and
controlled. In discharging its responsibilities and to
be accountable to our Members for the operation
of the Society, the Board regards good corporate
governance as extremely important. The UK Corporate
Governance Code (the Code), issued by the Financial
Reporting Council (FRC) in July 2018, is addressed to
companies with a premium listing. However, the Group
Board considers it to be best practice, and in the best
interests of all our stakeholders, to have regard to the
Code, in so far as is relevant to a building society,
when establishing and reviewing our corporate
governance arrangements.
The Code contains a set of principles that emphasise
the value of good corporate governance to long-
term sustainable success. The Code has at its heart
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. Our corporate governance procedures and
processes are regularly reviewed to ensure they are
aligned appropriately with the Code, including when
updates or revised guidance are published.
The FRC published the 2024 edition of the Code in
January 2024. The 2024 edition of the Code applies
to financial years beginning on or a
fter 1 January
2025. Therefore, this Report, together with the Audit
Committee Report, the Risk Management Report, and
the Remuneration Committee Report, outlines our
approach and how the Group Board considers it has
demonstrated application of the principles of the 2018
edition of the Code throughout 2024.
The Board
The Society recognises that it must be headed by
an effective Board which is responsible for the long-
term success of the Society, whilst acting in the best
interests of our current and future Members. James
Ramsbotham is the Chair of the Society and Mick
Thompson is the Deputy Chair. Further details of
the composition of the Board is 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 bene
fit o
f the Society’s Members.
The Board has responsibilities 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 building society.
An effective Board should not necessarily be a
comfortable place; constructive challenge, as well
as teamwork, being essential features. Open, honest
and transparent debate by Non-Executive Directors
is something which is encouraged by the Chair and,
where appropriate, training is provided to support
the challenge process. A culture of openness and
accountability exists within the Group at every level and
Non-Executive Directors regularly meet with members
of the Executive team throughout the year 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 Society’s business. No one
individual has unfettered powers of decision and the
roles of Chair and Chief Executive are exercised by
different people within the Society.
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.
Board balance and independence is important to
ensure an unfettered ability to fairly and objectively
direct the affairs of the Society. The Society’s Board
includes an appropriate combination of Executive and
Non-Executive Directors (and in particular independent
Non-Executive Directors) to ensure that no individual
or small group of individuals can dominate the Board’s
decision making. The composition of the Board,
through the Society’s Nominations and Governance
Committee, reflects an appropriate balance o
f skills and
comprises of seven Non-Executive Directors and four
Executive Directors as at the end of 2024.
Details of the various Board Committees in existence
are set out later in this report.
Matters reserved to the Board
As a mutual society, ensuring good customer
outcomes for our Members is a key area of focus
for Board discussions and decision making, whilst
also ensuring that the Board has oversight of the
operational resilience of the Society to ensure it can
deliver its important business services effectively.
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.
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An external effectiveness review of the Board’s
Committees and the Group’s subsidiary companies will
be taking place in 2025.
In compliance with the Code, Non-Executive Directors
hold the Executive Directors to account against agreed
performance objectives. As part of this scrutiny,
throughout 2024 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 ful
filling
their duties and performing against their agreed
performance objectives.
Board Committees
The Board delegates certain matters to Board
Committees. Each Board Committee comprises of
Executive and/or Non-Executive Directors who have the
most relevant experience to consider those matters
delegated by the Board. The roles and responsibilities
of each Board Committee are set out in their individual
Terms of Reference, which are reviewed on an annual
basis. The Chair of each Board Committee reports to
the Board at a subsequent Board meeting on matters
discussed at each Board Committee meeting.
Similar to the Board, each Board Committee carries
out a review of its own effectiveness, and where
improvement opportunities have been identified
the individual Board Committees are responsible for
tracking action points.
Information concerning attendances at the meetings
is detailed in the Board and Board Committee
Membership Attendance Record section of this
report. 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).
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 2024, 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.
Non-Executive Director Remuneration Committee
(“NED RemCo”)
The NED RemCo reports to the Board and its
overarching purpose is to consider, agree and
recommend to the Board an overall remuneration
approach for Non-Executive Directors together with
recommendations for individual fees. The Committee is
chaired by Andrew Haigh.
Group Technology Governance Committee
The Group Technology and Change Governance
Committee operated during 2024 and its authority
was to govern the strategic direction of the Group’s
technology and change activities and to advise
the Group Board with regards to progress against
the overall agreed strategy and deliverables. The
Committee was chaired by James Ramsbotham.
The decision was taken in January 2025 that this
Committee will cease because the responsibilities of
the Committee are already reported either directly into
the Board or to other Board Committees.
Nominations and Governance Committee
("Nominations Committee")
The Society has a Nominations Committee comprising
only of Non-Executive Directors and which operates
within the Terms of Reference agreed by the Board.
The current Members of the Nominations Committee
are James Ramsbotham (Committee Chair), Adam
Bennett and Rory Campbell. Rory Campbell is the Board
representative from the Nominations Committee who
sits on the Society’s Diversity, Equity and Inclusion
Steering Committee.
Nominations Committee is supported by the Chief
Executive and the Chief People Officer who attend
meetings in an advisory capacity only.
Nominations Committee operates to a rolling agenda
to ensure it discharges its full responsibilities. In 2024 it
met on five occasions.
The Nominations 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.
All key decisions of the Nominations Committee, for
example, Board appointments, must also be ratified by
the full Board.
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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 o
f 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
Stuart Lynn resigned as a Non-Executive Director at
the Annual General Meeting (AGM) on 24 April 2024.
Amanda Shepherd joined the Society in July 2024
as Chief Operating Officer. Amanda was formally
appointed to the Board on 3 December 2024 and will
be standing for election at the 2025 AGM.
Michele Faull, who was appointed to the Board in
August 2021, did not stand for re-election at the 2024
AGM. However, due to a change in circumstances,
Michele informed the Board that she was able to
continue in her role as a Non-Executive Director. The
Board appointed her to a casual vacancy on 29 April
2024; Michele will be standing for election to the Board
at the 2025 AGM.
Moorad Choudhry was appointed to the Board on 2
January 2025 and will be standing for election at the
2025 AGM.
All of the Society’s Directors are standing for either
election or re-election at the AGM, with the exception
of David Samper. David was appointed to the Board in
November 2018 and will be stepping down as a Director
before the 2025 AGM.
The biographies of all of the Directors standing for
election or re-election are detailed in the Our Directors
section and provide further details of how our Board
members’ skills and experience contribute to delivery
of a long-term and sustainable Society.
Copies of the Terms of Engagement for all of 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 members 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. A rolling Board agenda
is tabled at each Board meeting 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, effectiveness and evaluation
The Board recognise the importance of re
flecting
on the effectiveness of the Board. Having regard to
the Code, this is undertaken both through formal
and rigorous annual internal reviews of the Board, its
committees, the Chair and individual Directors and
through externally facilitated reviews. The Society
commissioned its last external effectiveness review in
2022 which was undertaken by BVALCO Limited.
Following presentation to the Board in October 2022
of the key
findings o
f the external review, the Board
has continued to reflect on the findings o
f the BVALCO
external review throughout 2024. When conducting
the internal effectiveness reviews, the findings o
f the
BVALCO report are reviewed and considered to ensure
that the Board continuously reflect on its behaviours
and development.
The next external effectiveness review of the Board will
be commissioned in late 2025 and is expected to take
place in 2026.
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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, as part of their terms of
engagement, 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 it operates. The training and
development plans of Non-Executive Directors
are reviewed at least annually during their
performance appraisal.
Nominations Committee oversees the on-going 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 are in place.
During 2024, 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 our
Members. Further details regarding our Member and
community engagement are given in the Building
Society Difference section and the Strategic Report.
Member engagement is at the heart of our strategy and
the Society develops relationships with Members on a
number of different levels. The
first and most obvious
is through the Annual General Meeting voting process
where Members are encouraged, as owners of the
business, to use their vote to register their views. We try
to make this process as easy as possible, providing the
convenience of voting online or by post, and providing
an additional incentive through a small charity
contribution for every online vote cast.
Following the success of our Member engagements
events held in 2023, we continued to hold a number
of events over 2024 across the North East and North
West. The events across the North East and North West
are an invaluable opportunity for the Chief Executive,
Executive team and Non-Executive Directors to hear
feedback from our Members. We were excited to hold
our first listening event in Manchester in April 2024.
We were keen to hear from our Members in their
own communities and therefore over 2024 we held
a number of community listening events across the
North East region, including events in Darlington, North
Shields, Whitley Bay, Yarm and Alnwick. Attended by
approximately 50 of our Members and Stakeholders
across all of the listening events, we were able to have
in-depth discussions with our Members to understand
more about the challenges and experiences of the
different communities across our regions and what
our Members in those communities would like to see
from us.
As well as engaging with our Board at the events,
Members are also welcome to contact Committee
Chairs via the Group Secretary if they wish to do so. We
have an online customer satisfaction feedback which
is regularly reviewed by the Chief Executive, Executive
team and senior managers.
We are committed to maintaining face to face
financial services and our investment into our branch
network has continued throughout 2024. Following
the success of our community partnership branches
in Knaresborough, Yarm, Hawes and Wooler, we have
continued on our journey of branch innovation with
the opening of a brand new, unique branch in North
Shields in partnership with YMCA North Tyneside. This
new branch secures the future of
financial services in
that community and is an exciting opportunity for us to
provide our services and engage with our Members in
this bustling community facility in the heart of
North Shields.
Throughout 2024, work has continued on our other
investments into our branch network. This includes
our new flagship branch in the heart o
f Newcastle city
centre which is due to open in 2025 which will include
a number of community spaces to be used by local
groups, charities and organisations. In September
2024, we were proud to open the doors of our brand-
new Pickering branch. As the 32nd branch in our
network, the Pickering branch will ensure that essential
banking services continue in the town following the
announcement that the last bank in the town will close
their branch in January 2025. Our Hartlepool branch
has undergone an exciting full refurbishment in Autumn
2024. During the period that the branch was closed, to
allow the exciting refurbishment work to be completed,
we opened a special ‘pop-up’ branch because we
recognise the importance of maintaining
financial
services in the town.
Through our community and charity support activities
we are able to engage with both our Members and
the communities we serve. Following the launch of
the Newcastle Building Society Community Fund
at the Community Foundation, we have provided
a growing volume of
financial grants to North East
community projects, some of which are nominated by
our Members. In 2024 Building Self-Belief CIO, who
work with vulnerable young people to improve their
mental health, self-esteem and life chances, received a
grant from the Newcastle Building Society Community
Fund to support the cost of running an employability
programme and the creation of a short
film exploring
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Appointments to the Board
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. Board appointments
must be ratified by the
full Board following the
Nominations Committee recruitment process. External
consultants and advisers are normally utilised to ensure
there is a robust list of suitable candidates with which
to fill a vacancy.
For the recruitment of the position of Chief Operating
Officer in 2024, Nominations Committee was assisted
by the Diversifying Group (an independent, external
recruitment firm). Other than advising the Society on
the recruitment of an Executive Director in 2024, the
Diversifying Group have no other connection with the
Society or any individual Director on the Board.
Miles Advisory (an independent, external recruitment
firm) assisted the Nominations Committee in the
recruitment of Moorad Choudhry, who was appointed
to the Board as a Non-Executive Director on 2
January 2025. Other than advising the Society on
the recruitment of the Non-Executive Director, Miles
Advisory have no other connection with the Society or
any individual Director on the Board.
When a new Director is appointed, 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 delegates responsibility to Nominations
Committee to give full consideration to succession
planning for the Board and its Committees.
Nominations Committee reviews the succession
planning on a regular basis, ensuring 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.
Diversity of the Board
The Board recognises and embraces the benefits o
f
having a diverse Board which utilises a range of factors
including skills, industry experience, background, race,
gender and the other characteristics, experience and
qualities of its Directors.
In regard to current gender ratios, three (25%) of our
Board Directors are women and two (17%) of our Board
are from ethnically diverse backgrounds.
It is important to note that all Board appointments are
made on the basis of individual competence, skills and
expertise measured against identified objective criteria.
Appointment is therefore based on merit.
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 23 April 2025, with the exception of
David Samper.
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 which is
reviewed 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.
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 2025, 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 o
f interests
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
to manage and identify any potential or actual con
flicts
of interests.
Nominations Committee and the Board review the
registers at least annually to ensure that all declarations
remain acceptable.
Time commitments
As part of their formal appraisal Non-Executive
Directors discuss the time commitment with the
Chair. To ensure that they can devote sufficient
time to undertake their role effectively, Nominations
Committee take into account the time commitment
when considering a request from a Non-Executive
Director to take any external appointments held within
other organisations. 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.
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Newcastle Strategic Solutions Limited (NSSL)
NSSL Board members:
The current Board members of NSSL are James
Ramsbotham (Chair and Non-Executive Director),
Bryce Glover (Non-Executive Director), Stuart Miller
(Newcastle Building Society Chief Commercial Officer)
and Amanda Shepherd (Newcastle Building Society
Chief Operating Officer).
In January 2025, Michael Hartig was appointed
Managing Director of NSSL. Stuart Lynn
(Non-Executive Director) resigned from the NSSL Board
on 24 April 2024.
The main responsibilities of NSSL, as delegated by the
Society’s main Board, are as follows:
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 identi
fied;
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 o
f 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 Board members are:
The current Board members of NFAL are Andrew Haigh
(Chair (appointed 19 September 2024) and Newcastle
Building Society Chief Executive), Anne Shiels (Non-
Executive Director), Stuart Miller (Newcastle Building
Society Chief Commercial Officer) and Iain Lightfoot
(Managing Director of NFAL).
James Ramsbotham resigned as a Director of NFAL on 9
September 2024.
The NFAL Board will also use external consultants
to provide challenge and advice to the Board, as
required. At least once a year Directors from Openwork
Limited attend an NFAL Board meeting to provide a
financial and market update; NFAL is an appointed
representative of Openwork Limited.
The main responsibilities of NFAL, as delegated by the
Society’s main Board, are as follows:
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 o
f 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;
the impact of the programme on its students. As part
of the programme, students were welcomed to our
Head Office at Cobalt where our colleagues engaged
with the students to provide mock interviews to build
the students' skills, confidence and work experience.
We work hard to make a difference and help our
communities make positive changes. In support of
our community and charity activities, we have also
continued to develop our relationships with the King’s
Trust and Citizens Advice Gateshead.
In 2024, we were proud to be the headline sponsor
of the Newcastle Mela as part of our commitment to
fostering inclusion, diversity and positive change in
our communities. As part of the festivities over the
August bank holiday, our colleagues hosted a stall
where we welcomed visitors to the largest
multicultural event in the North East. We raised
awareness of the Society’s community activities whilst
also providing us with an opportunity to learn more
about the diverse communities in our regions and build
new relationships.
The Financial Conduct Authority's new Consumer Duty
rules, where a firm must act to deliver good outcome
for customers, came into effect during 2023. Being
a mutual society, the interests of our Members are
already at the heart of our strategy and purpose and are
a key focus for Board discussions and decision making.
The introduction of the Consumer Duty principles
further supports the
five pillars o
f our Strategy. The
Board has appointed Rory Campbell, Non-Executive
Director, as Consumer Duty Champion. In June 2024,
the Board approved its first Consumer Duty Annual
Assessment, where the Board concluded that it was
satisfied we are complying with the Consumer Duty
and that our 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 our Strategy, we strive to be a ‘great place to work,
where people can realise their potential’. This pillar
ensures that the well-being of our colleagues is at the
forefront of our Purpose and is a key component of
Board discussions and decision-making.
To support our colleagues, we have launched a number
of networks within the Society including the Diversity,
Equity and Inclusion Network, LGBTQ+ Network, Women
in Leadership, Menopause Network and Disability
Network. The networks have been imperative in shaping
our policies and practices across the organisation. The
Board recognises the strength of embracing different
views, experiences and perspectives.
The Society has a well-established “Colleague Forum”,
chaired by a member of the Executive team. This
formally recognised group consists of colleagues who
represent all areas across the entire Group and who
support leaders in the delivery of key organisational
and people matters that are focused on creating a great
colleague experience.
Further details of our 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.
Over 2024, we have been on a significant culture journey
across the Group with all of our colleagues. A journey
which will support our Purpose of ‘connecting our
communities with a better financial
future’, which is at
the heart of everything that we do. Our colleagues have
embraced our new culture behaviours introduced over
2024 to ‘Be Curious’; ‘Be Courageous’; ‘Be Collaborative’;
‘Be Efficient’; and ‘Be Accountable’. At the heart of these
new culture principles is a passion for building lasting,
valued customer relationships and meaningful careers
for colleagues. As a Purpose-led Society, the Board
provides clear leadership to ensure that all policies,
practices and behaviours are aligned to our Purpose,
values and strategy. The Board monitors culture in a
number of ways throughout the year, receiving a range
of management information reported to Board at regular
intervals. This will also ensure that the Board has a good
understanding and oversight of how the new culture
behaviours are embedding within the Society.
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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* resigned as a Director on 24 April 2024
** appointed as a Director on 3 December 2024
Annual General Meeting (AGM)
The AGM provides an opportunity for Members to
question the Chair, Chief Executive, Board Committee
Chairs and other Directors on the resolutions to be
proposed at the meeting, the Annual Report and
Accounts, and on any other aspect of the
Society’s business.
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
using the 2-part unique security codes found in the
AGM pack. The use of the online voting system is
encouraged and for each vote placed online at the
AGM in 2025, the Society will be donating £2 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
28 February 2025
Director
Board
Audit
Committee
Group Risk
Committee
Remuneration
Committee
Nominations
Committee
Group
Technology
Governance
Committee
NSSL
NFAL
Adam Bennett
13 (13)
5 (5)
4 (4)
3 (3)
Rory Campbell
13 (13)
4 (4)
3 (3)
Michele Faull
12 (13)
7 (8)
2 (4)
Bryce Glover
12 (13)
4 (4)
5 (6)
3 (5)
Andrew Haigh
13 (13)
5 (6)
2 (2)
Stuart Lynn*
5 (5)
2 (2)
Stuart Miller
13 (13)
5 (6)
5 (5)
7 (7)
James Ramsbotham
13 (13)
3 (3)
6 (6)
5 (5)
5 (5)
David Samper
13 (13)
Amanda Shepherd**
2 (2)
1 (2)
Anne Shiels
13 (13)
7 (8)
4 (4)
7 (7)
Mick Thompson
13 (13)
8 (8)
3 (4)
6 (6)
Report of the Directors on Corporate Governance
| Continued
to consider and act upon the findings o
f 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 and Board Committee Membership
Attendance Record
The table below sets out the number of meetings
attended by Directors during 2024 with the number
in brackets representing the maximum number of
meetings the Director was eligible to attend.
In addition to the scheduled meetings as set out in the
Board meeting table below, the Board held two
strategy days in 2024 to discuss the future direction of
the Society.
Michele,
Non-Executive Director
70
69
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.
In 2024, the main areas of signi
ficant 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 for the residential and commercial books,
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 makes
non-binding recommendations on the Group’s
IFRS 9 scenarios (base, upside, downside and
stress), scenario inputs and scenario weightings.
In 2024, the Audit Committee’s attention focused
towards the current economic environment
and consideration of the risk associated with
heightened cost-of-living and re
financing risk on
the Group’s existing IFRS 9 scenarios. This included
the recalibration of the post model adjustments
for affordability given the improvement in the
economic outlook during the year. The Audit
Committee noted the impact of the post model
adjustment relating to the potential impact of
fire
safety risks relating to securities pledged on a
small portion of the book and the small post model
adjustment introduced. during the year in relation
to risks on securities pledged from the impact of
climate change.
The Audit Committee has concluded
that the Society’s provisions are appropriate
and reasonable.
In addition, the Audit Committee is satisfied that
the estimates, judgements and methodologies
applied to the commercial property provisions
relating to legacy assets acquired as part of the
Manchester merger, in particular those classified as
Purchased or Originated Credit Impaired (POCI) at
merger, are appropriate.
Effective interest rate:
Loans and advances to
customers are held at amortised cost, using the
effective interest rate method. That implies that
one-off charges and receipts, such as property
valuations the Society pays for, arrangement
fees and early repayment fees, are included as
interest income and spread over the life of the
product, rather than being recognised
separately. Assumptions and estimates relating
to the expected behaviour of the Society’s
current mortgages were reviewed based on
recent experience.
Equity release accounting and valuation:
In
respect of the valuation of the legacy equity
release portfolios, the Audit Committee reviews
and challenges the key model inputs. In particular,
the determination of the discount rate used to
calculate the value of projected cash
flows, and the
assumptions used to value the no negative equity
guarantee, such as future property price growth
and volatility. In the current year, a particular focus
of the Audit Committee was on the appropriate
discount rate for the cash
flows arising
from the
equity release portfolios. Whilst the basis of the
Group’s accounting estimate for deriving the
discount rate from observable market rates for the
purpose of valuing its equity release mortgage
loans remained consistent, management refined
its methodology for applying judgement and
assumptions during the period. Audit Committee
was kept fully informed and provided robust
challenge to management on the appropriateness
of judgements and the methodology applied.
The Audit Committee is satisfied that the
valuation at the year-end is appropriate and in
line with market practice and accounting
requirements; and that assumptions and
methodologies utilised for the equity release
portfolios, including the updated discount rate
calculation methodology, are appropriate and in
line with accounting requirements.
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.
Going concern:
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 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, noting the
capital raised during the year through issuance of
capital eligible instruments. 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.
Audit Committee Report
Audit Committee
Members of the Audit Committee at 31 December
2024 were:
Mick Thompson (Committee Chair), Anne Shiels, and
Michele Faull.
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.
Directors’ remuneration, including for members of the
Audit Committee, is detailed within the Remuneration
Committee Report. The Report of the Directors on
Corporate Governance also sets out the process for
reviews of the effectiveness of Board sub-committees,
including the Audit Committee. The Audit Committee
concluded that it was operating effectively as part of its
latest review, on 29 November 2023, and maintained
that view throughout 2024.
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 and
Board Committee 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 ful
filling 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 interim and
annual reports, and any other formal announcements
relating to the Group’s financial per
formance, and
to monitor the statutory audit of the annual and
consolidated accounts.
This responsibility is discharged through:
review of interim 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, taking into account the views
of the External Auditor;
review and challenge of signi
ficant 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 and business viability
assessment produced by the Chief Financial Officer
on a six-monthly basis;
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72
Audit Committee Report
| Continued
Additionally, and in accordance with good practice, the
Audit Committee also requires an external effectiveness
review of Internal Audit Services at least every
five
years, which considers the quality, experience and
expertise of the function. A review was carried out
during 2024 by an external firm appointed by the Audit
Committee. The review concluded that Internal Audit
Services was operating effectively and confirmed that
Internal Audit Services 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 o
f 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 o
f 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 per
forming 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 number of non-audit
assignments during the year including review of the
Interim Financial Report and assurances services in
relation to the Society’s capital raising. The fees paid to
the External Audit firm
for audit and non-audit services
are set out in the Administrative Expenses note to the
Annual Accounts. The ratio of non-audit fees to audit
fees in 2024 was 0.29:1.
Whistleblowing:
The Audit Committee reviews the Group’s procedures
for detecting fraud and policies related to its prevention
and detection, including whistle blowing. 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 Commitee
28 February 2025
Voluntary customer support provision:
The Audit
Committee was kept informed of the Board’s
actions regarding the support for Members
affected by the actions and subsequent collapse
of Philips Trust and reviewed accounting papers
prepared by management on the accounting
treatment of the costs associated with the
voluntary support, including recognition as a
provision for liability, the timing of recognition of
recoveries from Philips Trust administrators and the
associated tax treatment of the costs included in
this provision.
Replacement of
financial reporting system:
The Audit Committee challenged management
over the control framework applied to the
replacement of the
financial reporting system and
requested management to outline controls applied
and how they ensured accuracy of the
financial
information prepared during the year using the
new system. Management papers were presented
outlining the control framework applied to the
implementation and how management gained
comfort over the implementation of the new
system, including reconciliations to the incumbent
system and thorough management review. The
Audit Committee is satisfied the in
formation
provided by management can be relied upon as
evidence of a strengthened
financial reporting
control environment.
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.
The Audit Committee is satisfied that the key estimates
and judgements are appropriate and suitably disclosed
in the Annual Report and Accounts. Having
undertaken the above responsibilities and
considerations throughout the Group’s 2024 financial
year, the Audit Committee recommended to the Board
that approval be given to the audited Annual Report
and Accounts and Summary Financial Statements as at
31 December 2024.
Internal control and risk management:
The Audit Committee works closely with the Society’s
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
2024 included reviewing certain controls in operation
for lending, savings, information technology and
cyber security, treasury, finance, risk management,
operational resilience, regulatory compliance and
reporting and strategic change initiatives.
Internal Audit Services engaged the services of Ernst
& Young LLP, DCR Partners Ltd and BDO LLP during
2024 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 the Group’s
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 quali
fication and
effectiveness of Internal Audit Services is
undertaken by the Audit Committee annually and most
recently in July 2024, which concluded positively,
confirming that Internal Audit Services effectively met
its responsibilities.
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74
Remuneration Committee Report
Annual statement from the Chair of the Remuneration Committee
75
76
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 2024. 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, 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
our Remuneration Committee in 2024
As a Society, our Purpose continues to be
'connecting our communities with a better financial
future'. This guides all the Society’s actions including
how we reward our colleagues, including leaders and
Board members.
2024 was another successful year for the Society
but the challenges of high in
flation during 2023 and
its ongoing impact on the cost of living for both our
Members and our colleagues remained a concern in the
early parts of the year. In this environment, paying our
colleagues, particularly those in lower paid roles, a fair
and competitive wage remained a high priority for the
Committee. This was to help ensure both the financial
wellbeing of our colleagues and that the Society
remains able to attract and retain the best talent.
To address these cost of living challenges the
Committee approved a differentiated approach to
pay review in 2024, with colleagues in lower paid
roles receiving a higher pay award than colleagues
in more senior and better paid positions. Our pay
review approach awarded average increases of
10% for colleagues in our lowest pay range, 7.5% for
colleagues in our next band with remaining colleagues
receiving on average a 5% increase in their pay. This
differentiated approach to pay review helped support
the 40% of our colleagues in our lowest pay bands with
a higher award, ensured that we continued to pay each
of our colleagues at least the real living wage whilst
maintaining appropriate pay differentials between
colleagues at different levels of seniority.
I am also pleased to report that we took several further
actions in the last year to ensure our reward package
reflects our Purpose by delivering a great place to work
and helping us to foster inclusion, diversity and positive
change in our workplace.
Firstly, we made significant changes to our Parental
Leave Policy in 2024 by both improving our paid
parental leave provisions and equalising the parental
leave offering across all parents, regardless of gender,
sexuality or route to parenthood. In conjunction with
these changes, we also reviewed and improved a
number of supporting policies and practices including
our adoption, surrogacy, fertility support, neonatal and
return to work policies. We undertook these changes to
support working parents, who we recognise represent
a key demographic in our workforce and in recognition
that family friendly policies and equalised parental
leave are two key ways to help address the gender
pay gap.
As an organisation we continue to see a gender pay
gap but are pleased to see this reduce over the last
12 months, because of some of the actions we have
taken. Additionally, I’m pleased to confirm that we
have voluntarily chosen to report our ethnicity pay gap
alongside our gender pay for the last two years. We
believe in being transparent about these gaps and are
committed to taking action to reduce both pay gaps,
as outlined in our recently published report, which is
available on our website.
I am also pleased to confirm that in addition to the
Society being a ‘Living Wage Employer’ and part of
the action group that is seeking to make Newcastle
a ‘Living Wage City’ we were also accredited as a
‘Living Pension Employer’, in the last 12 months. This
accreditation helps to ensure we provide each of our
colleagues access to a pension that is designed to
meet at least their basic everyday needs at retirement.
This is a relatively new accreditation provided by the
Living Wage Foundation and we’re pleased to have
been the first building society and organisation in the
North East to receive this accreditation.
In conjunction with becoming a ‘Living Pension
Employer’ we were keen to ensure our colleagues had
a better understanding of their pension and to help
them plan better for their retirement. We therefore
undertook a programme of
financial well-being
sessions throughout 2024 with a key focus on pensions.
These sessions were led by colleagues from our HR and
Newcastle Financial Advisers teams and as a result of
this programme and a wider colleague communication
campaign we have seen 15% of colleagues choose to
increase their pension contributions over a 12-month
period. We will continue to focus on colleagues’
financial well-being and seek to support them in a
variety of ways throughout 2025.
Director and Executive remuneration in respect
of 2024
The Committee’s role is to consider, agree and
recommend to the Board an overall Remuneration
Policy and approach that is aligned to the Society's
overall Purpose, while ensuring that it remains
aligned with the long-term interests of the Society’s
Members and other stakeholders. We constantly strive
to maintain the highest standards of governance
and fairness in relation to remuneration and ensure
continued alignment with our business strategy. Risk
appetite and regulatory requirements are also at the
forefront of the Committee’s consideration and close
alignment is maintained throughout the year with the
Society’s Group Risk and Audit Committees.
Significant work has been carried out over recent years
to introduce a robust and equitable performance and
reward framework for colleagues across the Society,
in a way that is fair, affordable, re
flects market practice
and ensures that the organisation offers competitive
total reward packages. Part of this process has been to
ensure closer alignment of our Executive remuneration
to our peers in the sector and the wider market. The
pay increases of our Executive team therefore ranged
from 0% to 10.8% in 2024, re
flective o
f personal
performance and alignment to market benchmarks. The
average/median increase of the Executive team was
5% and was in line with our wider workforce, where the
average increase was 7.5% to 10% for colleagues in our
lowest paid pay bands and 5% for all other colleagues.
2024 bonus awards were made to the Executive team
and reflected the Society’s per
formance against a
range of
financial and non-financial metrics, including
profit, net lending, net
funding, customer net promoter
score (NPS) and employee net promoter score (eNPS).
The profit metric used
for bonus purposes is underlying
group operating profit which is reflective o
f the core
activities of the Group and excludes one off income
or expenses, and gains or losses which are outside of
the normal course of business. The voluntary
financial
support to Members that the Society has chosen to
make to help customers whose trusts are affected by
the actions and subsequent collapse of Philips Trust is
considered a one-off item and as such is excluded from
underlying group operating profit.
In 2024, underlying group operating profit achieved
the stretch target set by the Committee at the start of
the year. Under normal circumstances this would result
in the maximum pay-out of this element. However
the Committee are mindful of the signi
ficant value
of
financial support offered to Members affected by
Philips Trust, and the impact this will have upon Group
profit be
fore tax. Whilst the Committee fully support
the decision of
financial support
for Members affected
by the collapse of Philips Trust it has chosen to operate
some downward discretion and reduce the value of
bonus payments linked to the profit metric to a ‘target’,
rather than the ‘maximum’ award value.
The overall level of Executive bonus payments for 2024
were therefore 35.4% of salary. This level of bonus
payments is slightly above the 30% on target award but
below the maximum available award of 50% of salary.
With the exception of the downward discretion
exercised by the Committee, as outlined above, 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.
As per prior years, 50% of Executive bonus is deferred
and payable in later years, this allows the Committee to
review whether the payment remains appropriate and
in line with Strategy and Purpose, providing the ability
to operate the malus and clawback rules in place for
the scheme and thus potentially reducing or cancelling
the payments in cases such as, but not limited to,
significant
failures in risk management, material errors
or the Society’s financial underper
formance.
The malus and clawback rules are in place for a period
of
five years a
fter bonus payments are made. The
Committee have reviewed the provisions contained
in these rules prior to awarding any bonus payments
for 2024 and can con
firm that no circumstances have
arisen which require them to be exercised.
The relative levels of bonus payment for Executives,
against the maximum percentage award, was similar for
all colleagues across the Group who participate in our
‘Sharing in Our Success’ Bonus Scheme and the bonus
scheme operated in a similar way, except no bonus
deferral is in place in our colleague scheme.
Further detail on how we have delivered our Purpose of
being a great place to work, where people can realise
their potential in 2024, can be found in our Chair’s
Report, Chief Executive Review and Strategic Report.
Anne Shiels
Non-Executive Director (Chair)
Mick Thompson
Non-Executive Director
& Chair of Audit Committee
Rory Campbell
Non-Executive Director
Remuneration Committee Report
| Continued
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 proposed
by the Chief Executive or
Chair and approved by
the Committee.
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 bene
fits 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 re
flect
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.
77
78
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.
With regard to Executive Directors’ annual pay rise, the
percentage increases are dependent on performance
in the same way that this applies to the Group’s wider
colleague base.
In designing the Directors’ Remuneration Policy, the
following key principles have been followed:
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 are transparent
and fair, re
flecting individual responsibilities and
performance; and
Remuneration arrangements are straightforward to
understand, communicate and administer.
Key changes to the Directors’ Remuneration Policy
for 2025
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. There is however one proposed
change to our Policy for the coming year.
The Committee recently reviewed the Executive
Bonus Scheme and undertook external benchmarking
of the scheme compared to other
financial services
institutions, including other Building Societies. This
exercise, supported by independent advice from
Willis Towers Watson, indicated that the level of bonus
opportunity available to Executives has fallen behind
the market in recent years. This is also aligned to the
Society’s recent experience in recruiting senior roles,
where a lower level of bonus opportunity has made it
more difficult to attract the appropriate calibre of skills
and experience to support the delivery of our ambitious
strategic plans.
To ensure the Society can continue to attract and retain
the appropriate calibre of Executives, in an increasingly
competitive market place, the Committee have chosen
to increase the ‘on target’ bonus available under the
Executive bonus from 30% of salary to 50%, with the
maximum award increasing from 50% to 75% of salary.
These changes will come into effect from 2025. The
scheme will continue to be based on a robust set of
financial and non-financial measures together with
personal objectives. In addition, there will continue to
be a deferred element to the bonus, with 50% of the
award paying out in the year after the bonus is earned
and the remainder in equal parts over the following
two years. The deferred element of bonus goes above
and beyond the Financial Reporting Council and
Prudential Regulation Authority requirements, however
the Committee have chosen to keep deferral in place
in line with best practice and to facilitate the effective
operation of malus and clawback rules, if required.
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.
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. This
table includes the updates to the Executive Bonus Scheme which will come into effect from 2025, as outlined in
this report.
Remuneration Committee Report
| Continued
Directors’ emoluments (Audited)
The total remuneration received by Executive Directors
is shown opposite. The information has been audited
and shows remuneration for the years ended 31
December 2023 and 31 December 2024 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.
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
2024
504
59
181
-
744
2023
484
57
146
-
687
D Samper (Note 6)
2024
333
42
-
-
375
2023
318
41
48
-
407
S Miller
2024
296
39
106
-
441
2023
279
37
86
-
402
A Shepherd (Appointed 29 July
2024)
2024
139
18
49
-
206
2023
-
-
-
-
-
Total for Executive Directors
2024
1,272
158
336
-
1,766
2023
1,081
135
280
-
1,496
Non-Executive Directors
B Glover
2024
79
-
-
-
79
2023
70
-
-
-
70
A Laverack
(Business name: Anne Shiels)
2024
70
-
-
-
70
2023
67
-
-
-
67
K Ingham (Retired 26 April 2023)
2024
-
-
-
-
0
2023
22
-
-
-
22
MR Thompson (Note 7)
2024
93
-
-
-
93
2023
89
-
-
-
89
GA Bennett
2024
65
-
-
-
65
2023
60
-
-
-
60
S Lynn
(Retired 24 April 2024)
2024
18
-
-
-
18
2023
63
-
-
-
63
MJ Faull
2024
52
-
-
-
52
2023
50
-
-
-
50
JDA Ramsbotham
2024
118
-
-
-
118
2023
113
-
-
-
113
R Campbell
(Appointed 01 June 2023)
2024
52
-
-
-
52
2023
29
-
-
-
29
Total for Non-Executive
Directors
2024
547
-
-
-
547
2023
563
-
-
-
563
Total for all Directors
2024
1,819
158
336
-
2,313
2023
1,644
135
280
-
2,059
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 per
formance
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 2024
scheme this was a
profit gateway,
1.
During 2024 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 £45,360 (2023: £43,530) as a cash payment.
He is liable for his own tax and national insurance
contributions on this payment.
3.
Mr D Samper has elected to take his pension contribution
amounting to £29,948 (2023: £28,575) 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 £26,663 (2023: £25,125) as a cash payment. He
is liable for his own tax and national insurance contributions
on this payment.
5.
Mrs A Shepherd has elected to take her pension contribution
amounting to £12,525 (2023: nil) as a cash payment. She is
liable for her own tax and national insurance contributions on
this payment.
6.
Following David Samper’s resignation, under scheme rules,
he is not entitled to any deferred bonus payments due in
future years. He therefore will not receive the deferred
amount of £49k relating to his 2023 bonus that had been
expected for payment in future years
(2025: £24k and 2026: £25k).
7.
Mr M Thompson received £19,613 (2023: £18,900) in relation
to chairing the Newcastle Building Society Pension and
Assurance Scheme Board which is included in the figures
presented in the table.
8.
No Directors received termination payments in 2024
(2023: None).
79
80
*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.
Executive bonus
Remuneration Committee Report
| Continued
Chief Executive remuneration
The Chief Executive is the Group’s most highly paid
colleague and no colleague earns more than any
Executive Director.
Mr Andrew Haigh received a 5% pay rise on base
salary in April 2024. 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 average increase 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, 50th and 75th percentiles
against the CEO’s single figure.
Annual Executive Bonus
The Executive Bonus Scheme is paid in three parts,
with the first payment o
f 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 under per
formance.
The Executive Bonus Scheme is dependent on
performance, measured against personal
objectives as well as financial and non-financial
performance indicators.
In 2024 both a profit gateway (financial gateway) and
a strategic projects gateway were in place for the
Executive Bonus Scheme and needed to be met prior
to any payments being made. This ensured a minimum
level of underlying Group operating pro
fit was achieved
and significant progress had been made against the
delivery of key infrastructure and programmes directly
linked to Member Value, before any bonus payments
became available. Furthermore, each Executive’s
personal performance was required to have at least
‘met expectations’, as determined by the Committee, to
qualify for any bonus payment.
Following the achievement of these two gateways and
the personal performance criteria, the level of bonus
payments were then determined by the Society’s
performance against a range of
financial and non-
financial metrics, including profit, net lending, net
funding, customer net promoter score (NPS) and
employee net promoter score (eNPS).
In 2024, should all gateways and bonus metrics have
been met, the level of on target bonus was set at 30%
of base salary for each Executive with a maximum
bonus potential of 50% of base salary for exceptional
business performance.
The Society achieved both bonus gateways and ‘above
target’ against a number of metrics set for the scheme.
As outlined in the statement from the Committee
Chair at the beginning of this report, underlying group
operating profit per
formed very well in 2024 and
achieved the stretch target set by the Committee.
Under normal circumstances this would result in the
maximum pay-out of this element of bonus. However
the Committee are mindful of the signi
ficant value
of
financial support offered to Members affected by
the actions and subsequent collapse of Philips Trust,
and the impact this has had upon Group profit be
fore
tax. Whilst the Committee fully support the decision
of
financial support
for Members affected by the
collapse of Philips Trust it has chosen to operate some
downward discretion and reduce the value of bonus
payments linked to the profit metric to a ‘target’ rather
than the ‘maximum’ award value.
The overall level of Executive bonus payments for 2024
were therefore 35.4% 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.
As per these rules no bonus is therefore payable to
David Samper who announced his departure from the
business in early 2025.
With the exception of the downward discretion
exercised by the Committee, as outlined above, 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 opposite.
Quartile
Base
salary
£
Total
pay and
benefis
£
Ratio to
CEO
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
Executive
Director
Bonus
deferred
from
Bonus
payable
in 2025
£000
Bonus
payable
in 2026
£000
Bonus
payable
in 2027
£000
Total
deferred
bonus
£’000
Andrew Haigh
2022
54
54
-
108
2023
73
37
36
146
2024
90
45
45
180
Total
217
136
81
434
Stuart Miller
2022
30
30
-
60
2023
43
22
21
86
2024
53
27
27
107
Total
126
79
48
253
Amanda Shepherd
2024
25
12
12
49
Total
25
12
12
49
Total
368
227
141
736
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 o
f 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 rati
fication by the Board.
As noted above, following David Samper’s resignation, under scheme rules, he is not entitled to any deferred bonus
payments due in future years. The amounts deferred under the scheme and no longer payable are 2025: £61k and
2026: £25k.
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 £52,500
(2023: £50,000) for Non-Executive Directors and £119,700 (2023: £114,000) for the
Board Chair.
Additional
fees
Additional fees are payable for additional responsibilities, such as Committee Chair,
Chair or NED of a subsidiary business or for being the Senior Independent Director.
Fees range from £5,400 to £21,600 (2023: £5,150 to £20,600) 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.
81
82
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, 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 2024. A review of the effectiveness
of the Committee was also undertaken during 2024
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 £15,636 (2023: £10,200)
On behalf of the Board
Anne Shiels
Chair of Remuneration Committee
28 February 2025
Remuneration Committee Report
| Continued
Category
Year
Number of
colleagues
Salary or Fees
£'000
Other taxable
benefits
£'000
Variable
remuneration
(Note 1) £'000
Total
remuneration
£000
Executive
Directors
2024
4
1,272
158
336
1,766
2023
3
1,081
135
280
1,496
Other Senior
Management
2024
5
870
110
295
1,275
2023
5
879
121
255
1,255
Other material
risk takers
2024
18
1,891
268
367
2,526
2023
18
1,827
234
314
2,375
Total
2024
27
4,033
536
998
5,567
2023
26
3,787
490
849
5,126
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 2024 ‘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.
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.
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 2024. Member approval was given to the
31 December 2023 Directors’ Remuneration Report
(92% approval with 15,437 votes for, 1,310 against and
333 withheld).
83
84
Risk Management Report
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 identi
fy,
measure, monitor, report and control risks 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.
The second line of defence Risk function 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 o
f risk
management and the internal control systems which
have been in place throughout the year.
The Chief Risk Officer provides formal updates on risk
management to the Board, in relation to the Group, on
a regular basis.
Group Risk Committee
The Group Risk Committee, chaired by Non-Executive
Director Bryce Glover, oversees the risk management
and governance framework, and the overall risk pro
file.
The 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;
oversight of compliance with risk policies;
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 and Resolution Pack (RRP);
oversight of the risk sub-committees (see risk
governance structure section of this report); and
review and assessment of the risk appetite and
associated stress testing.
During 2024, Group Risk Committee considered the
following matters:
The annual operational resilience self-assessment.
Further positive progress has been made with
continued maturity and embedding to maintain
compliance with regulatory requirements;
The impact of interest rate payment shock on
mortgage product maturities to inform both risk
management and support for relevant customers;
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;
Approach to categorisation of material suppliers,
covering all third-party arrangements deemed
to be material, irrespective of whether the
arrangement is outsourcing; and
Review and approval of 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 2024.
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 o
f the nature
of the associated risk.
The Credit Risk Committee met on thirteen occasions
in 2024.
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 eleven
occasions in 2024.
Model Risk Committee
The Model Risk Committee, chaired by the Chief Risk
Officer, ensures the Group’s compliance with the
Prudential Regulation Authority (PRA) 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 seven occasions
in 2024.
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 fourteen
occasions in 2024.
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.
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Risk Management Report
| Continued
Risk Governance Structure
Key
Liquidity Management
Committee
Risk sub committee
and second line
committees
Newcastle Building
Society Group Board
Intermediaries
Oversight Committee
Hedging
Management Group
Group Security
Committee
Credit Risk
Committee
Assets and
Liabilities Committee
Model Risk
Committee
Enterprise Risk
Committee
Finance Governance
Committee
Regulatory Returns
Controls Committee
Mortgage and
Savings Committee
Newcastle
Strategic Solutions
Limited Board
Board Committees
and subsidiary boards
Newcastle Mortgage
Loans (Jersey)
Limited Board
Newcastle
Financial Advisers
Limited Board
MBS (Mortgages)
Limited Board
Group Risk
Committee
Remuneration
Committee
Non-Executive
Remuneration
Committee
Nominations
Committee
Audit
Committee
Executive
Committee
First line committee
Solutions
Business Risk
Operational Risk
Conduct Risk
Residential Credit Risk
Commercial
Credit Risk
Macro Economic Risk
Climate Change Risk
Liquidity Risk
Capital Risk
Interest Rate Risk
Treasury Credit Risk
Macro Economic Risk
Macro Economic Risk
Risk Covered
Operational Risk
Conduct Risk
Climate Change Risk
Cyber Risk
Liquidity Risk
Interest Rate Risk
Climate Change Risk
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Principal Risk
Risk Management
Commentary
Capital Risk
(Principal Risk)
Capital risk refers to the risk that the Society
holds insufficient capital to cover the risks
it is exposed to and therefore is unable to
absorb losses arising in a stress or finds itsel
f
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
Society or a combination of both.
To manage this risk, the Society 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 2024.
The Society has raised £60m
external capital in the year,
demonstrating the confidence o
f
external investors in the Society and
the Society’s ability to raise capital.
As a result, the total capital ratio
improved from 14.1% to 15.7%,
remaining well ahead of the
regulatory minimum of 8%.
Common Equity Tier 1 (CET1) capital
has reduced from 12.5% to 12.2%,
as no CET1 capital was raised and
generation of capital through
profitability was lower than the
use of CET1 capital due to
business growth.
This 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 (and in 2024
the impact of the voluntary
financial support o
f Members
affected by the collapse of Philips
Trust) are continually reviewed in
order 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-certi
fication
lending and has minimal exposures to
commercial and other legacy lending.
The Lending Policy is actively managed and
has been enhanced throughout 2024 to
ensure we respond appropriately to
the macroeconomic environment and
market challenges.
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 2024.
During 2024 the Bank of England
base rate has reduced by 50 basis
points (0.5%), average earnings
growth has remained above
the consumer price inflation,
which has almost halved and is
trending towards the Bank of
England’s 2% target. Overall, the
cost of borrowing has reduced.
All of these factors have slightly
eased affordability pressures
and supported a recovery in the
housing market, with house prices
increasing by around 4% during the
year, against market expectations.
Residential mortgage arrears have
increased slightly but remain
broadly stable and well within
risk appetite. Actual losses on
residential mortgages lending
remain extremely low.
Loan impairment provisions during
the year have decreased to some
extent, reflecting the easing in
affordability and wider credit risk
environment. The level of loan
impairment provision is appropriate,
aligned to historical experience and
reflects expected
macroeconomic trends.
Although borrowers have
remained resilient, the outlook
remains uncertain given ongoing
geopolitical tensions and emerging
fiscal policies. The Group
continues to monitor these
uncertainties and the impact of
borrower’s ability to pay to ensure
that appropriate support is provided
to all our borrowers.
Risk Management Report
| Continued
Principal Risks
The Society’s Purpose is 'connecting our communities with a better financial
future'. To enable the Society 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 to achieving its strategic objectives as principal risks. In addition to the
principal risks, climate risk is included as an emerging risk, reflective o
f the increased frequency/severity of climate
related events.
The current principal risks the Group faces are:
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Risk Management Report
| Continued
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 appetite
statements relating to customer outcomes.
Performance is measured against this with
monthly 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 (FCA) in 2024.
The Group’s programme to review and
align its conduct risk management to these
regulatory requirements has been robust
and reinforces the focus on delivering good
outcomes for our customers.
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 increased in 2024.
The risk is considered to have
increased and then stabilised in
2024. This was in part due to the
higher standard of consumer care
required by the FCA’s Consumer
Duty for new and existing products,
which requires more proactive
action to deliver good outcomes
and fair value. Maintaining relevant
control frameworks remains a key
focus, particularly in relation to
further enhancing monitoring and
testing of outcomes and supporting
customers with vulnerabilities. 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 (NII) and
economic value of equity (EVE). 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 policy defined limits and metrics.
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 2024.
The market volatility that increased
the level of this risk in 2023
continued during 2024. The year
included geopolitical, economic
and fiscal policy changes o
f note.
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.
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Risk Management Report
| Continued
Principal Risk
Risk Management
Commentary
Liquidity Risk
(Principal Risk)
The Group ensures it holds sufficient quality
and quantity of liquidity to be able to
withstand 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 Schemes designed to support
financial institutions, such as Term Funding
Schemes.
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 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 weekly
Liquidity Management Group in place
and monthly reporting to the Assets and
Liabilities Committee.
Investments are subject to a Group Risk
Committee approved 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 2024.
Liquidity risk overall remains within
our risk appetite and the Group
maintains sufficient sources of
liquidity to be able to avoid having
to sell investments at a discount to
raise cash, even in severely stressed
circumstances.
The Group has £359m (2023:
£522m) of Term Funding Scheme
and Term Funding for SME drawings
which are due to be repaid during
2025. Relevant drawings were
repaid in 2024 as due. The Group
plans to replace these funds
with additional retail funding and
through a securitisation program.
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 risk
events, response and operational losses.
Key and emerging risks, taking account of
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 associate impact
tolerances defined, critical dependencies
identified and a programme o
f plausible
and severe 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 2024.
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 mapped by all areas
of the business, to understand the
risk profile and to in
form actions
to maintain residual risks within
defined appetite.
As the Group’s business model
includes diversification via the
Newcastle Strategic Solutions
business, this increases exposure
to operational risk, particularly in
relation to IT systems capability and
human error.
Corporate insurance policies have
been negotiated with regard to the
key risks within the Group requiring
greater mitigation.
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Risk Management Report
| Continued
Principal Risk
Risk Management
Commentary
Cyber Risk
(Principal Risk)
The Group’s Cyber Security framework
comprises a suite of cyber security policies
which are aligned to the controls structure
of ISO27001:2022. These policies are subject
to 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 cyber capability model
comprised of threat management, security
operations, colleague behaviour, risk
profiling and risk and control sel
f-assessment
(as per the Operational Risk framework,
and governance and MI reporting). 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 static in 2024.
The cyber risk threat remains
elevated in 2024 in line with the
increasing trend in 2023.
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 at a higher level
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 2024.
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. Climate change scenarios
have been developed which have been used
in capital modelling and stress testing.
The Group actively engages with the
industry as a whole to consider the potential
impacts and longer-term scenarios of
climate change and resulting risks.
Climate risk remains an emerging risk given
the uncertainty in relation to the exact nature
and timing of the impact on the Group’s
strategy and operations.
Risk was static in 2024.
The broader climate risk continues
to increase as a result of increased
frequency/severity of climate
related events. The Group continues
to strengthen its strategic focus on
environmental sustainability.
Scenario planning and modelling
continue to evolve, though the
Group’s exposure to losses from
climate change related risks remains
low in the context of overall credit
loss provisioning.
Exposure and potential impact will
continue to evolve as government
policy develops and technology
advances.
Additional notes
Principal risks covered in the 2023 report but now
removed and not included in the 2024 report are:
Credit risk – Commercial: this is no longer
considered a separate category of principal risk
as the commercial loan book continues to be
actively managed down and is more appropriately
referenced where relevant within an overall credit
risk category.
Macroeconomic risk: impacts 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
management control.
Investment credit risk: rather than a separate
principal risk category this would be referenced
where relevant within liquidity risk, for example
if the lower credit quality of liquid assets had a
material impact on available liquidity.
As outlined in the Half-Yearly Financial Information
2024, the Society announced it would provide a
scheme of voluntary
financial support to its Members
affected by the actions and subsequent collapse
of Philips Trust. There was no legal or regulatory
requirement to provide financial support and the
Society considered any impact on the risks above in
addition to how to balance our values, our reputation
as a Member owned mutual business, and the
expectations of the communities we serve.
On behalf of the Board
Bryce Glover
Chair of the Group Risk Commitee
28 February 2025
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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 Directors’ considerations regarding
whether they consider it appropriate to adopt the
going concern basis of accounting;
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 o
f 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.
Materiality
The materiality that we used for the Group
financial statements was £2.7m which was
determined on the basis of 0.8% 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, pro
fit be
fore tax and net assets of the Group.
Significant changes
in our approach
Following our risk assessment procedures, we concluded that the accounting and
valuation of the merger with Manchester Building Society (MBS) was no longer a key audit
matter. The merger occurred on 1 July 2023 with no significant accounting judgements
that involved accounting estimation uncertainty continuing into the current year.
Independent Auditor's Report
to the Members of Newcastle Building Society
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements o
f 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 2024
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 balance sheets;
the Group and Society statements of movements in
members’ interests;
the Group and Society cash flow statements; and
the related notes 1 to 45.
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 ful
filled 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 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.
3. Summary of our audit approach
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5.2
Expected credit loss (ECL) allowance on residential lending
Independent Auditor's Report
| Continued
to the Members of Newcastle Building Society
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 signi
ficant
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 £4.9m (2023: £5.9m) 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 £4,908.8m (2023: £4,409.4m).
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 o
f macro-economic assumptions, and scenario
weightings 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 and weightings applied in the IFRS 9 model.
The Group’s loan loss provision balances are detailed within note 12. The associated
accounting policies are detailed on page 119 with detail about critical accounting
judgements in applying accounting policies and key sources of estimation uncertainty on
page 122. The Group’s consideration of the effect of the future economic environment is
disclosed in note 40. The Audit Committee’s consideration of the matter is described on
page 72.
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 Society’s 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;
challenging management as to whether there was sufficient evidence for 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 signi
ficant accounting estimates.
Key observations
Based on the work performed, we concluded that the Group’s ECL applied to the residen-
tial mortgage book is reasonable.
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 2024 of £171.6m (2023: £188.4m),
including £146.7m (2023: £161.3m) located in the UK and £24.9m (2023: £27.1m) 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 its estimate of the discount rates used and future UK
house price (HPI) assumptions used within the fair value models and the impact these
assumptions have on the modelling of the no negative equity guarantee. This also
includes consideration of repayment pro
files and the credit risk associated with
the assets.
The Group’s disclosure of the ERMs is detailed within note 13 and note 34. The associated
accounting policies are detailed on page 118 with detail about critical accounting
judgements in applying accounting policies and key sources of estimation uncertainty on
page 122. The Audit Committee’s consideration of the matter is described on page 72.
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 Society’s valuation methodology for the ERM portfolio by:
involving our valuation specialists in the audit of the Group’s valuation approach;
verifying that the ERM model is consistent with the model reviewed by our modelling
specialists in previous years, when we assessed that the model mechanics had been
prepared in accordance with the contractual terms of the loans;
involving our valuation specialists in our assessment of the rate 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 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 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. Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most signi
ficance
in our audit of the
financial statements o
f 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.
5.1
Fair value of equity release mortgages
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Group financial statements
Society financial statements
Materiality
£2.7m (2023: £2.4m)
£2.4m (2023: £2.3m)
Basis for
determining
materiality
0.8% of the Group’s net assets
(2023: 0.8% of the Group’s net assets)
0.8% of the Society’s net assets
(2023: 0.8% of the Society’s net assets).
Society materiality is capped at 95% of the
Group materiality (2023: capped at 95% of
Group materiality)
Key observations
In determining materiality we considered a range of possible 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 be
fore tax. Therefore net
assets (consisting of reserves and subscribed capital) have been considered the most
appropriate base on which to determine materiality.
6. Our application of materiality
6.1
Materiality
We define materiality as the magnitude o
f misstatement in the
financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or in
fluenced. 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:
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.
Group financial statements
Society financial statements
Performance
materiality
70% (2023: 70%) of Group materiality
70% (2023: 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.
6.3
Error reporting threshold
We agreed with the Audit Committee that we would
report to the Committee all audit differences in excess
of £135k (2023: £118k), 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
three components (2023: four components) where we
performed an audit of the entire
financial in
formation.
This provided 99% (2023: 99%) coverage of revenue,
profit be
fore 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 £0.2m to £1.7m (2023: £0.2m
to £1.6m).
At the Group level, we also tested the
consolidation process.
7.2
Our consideration of the control environment
Our approach in relation to the Group’s
business cycles
We relied on 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 tested and relied on relevant automated and
manual controls tested over these business cycles
within the Group. We also obtained an understanding
of controls that relate to our identi
fied significant audit
risks. The Audit Committee’s assessment of the Group’s
internal control environment is set out on page 73.
Our approach in relation to the 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; and
Underlying databases for the above system,
as applicable.
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, and were able to rely on
these controls as originally planned.
We also obtained an understanding of the relevant
controls of the Group’s new accounting system,
WorkDay which was implemented during the year and
assessed the reconciliation of balances between the
legacy systems and WorkDay.
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 39, 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.
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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. I
f, 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 Statement of Directors’
Responsibilities, 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.
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 o
f the risks
of irregularities, including those that are speci
fic 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, 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 identi
fied the greatest
potential for fraud in the following areas: fair value
of equity release mortgages and ECL allowance for
residential lending. In common with all audits
under ISAs (UK), we are also required to perform
specific procedures to respond to the risk o
f
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 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 identi
fied
fair
value of equity release mortgages and ECL allowance
for 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 per
formed 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 those responsible for legal and compliance
matters 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 PRA, 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 signi
ficant 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.
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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 identi
fied 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 45 to
the financial statements
for the
financial year ended
31 December 2024 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 o
f
total uninterrupted engagement including previous
renewals and reappointments of the
firm is
four years,
covering the years ending 31 December 2021 to 31
December 2024
.
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 this 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
On behalf of Deloitte LLP
Statutory Auditor
Manchester, United Kingdom
28 February 2025
Consett,
County Durham
106
105
Hawes,
Yorkshire Dales
Statements
Financial
108
107
The notes on page 116 to 195 form part of these Accounts.
The notes on page 116 to 195 form part of these Accounts.
Statements of Comprehensive Income
for the year ended 31 December 2024
Note
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Interest receivable and similar income
Interest income calculated using effective interest rate
2
294.7
223.5
Interest income recognised in respect of mortgages held at fair value
2
11.4
11.1
Net income on derivatives hedging mortgage assets
2
30.7
26.3
Total interest receivable and similar income
2
336.8
260.9
Interest payable and similar charges
3
(243.8 )
(173.5 )
(243.0)
(173.5)
Net interest income
93.8
87.4
Other income
4
14.2
13.7
Other charges
4
(0.2 )
(0.2 )
(0.2)
(0.2)
Fair value gains less losses on financial instruments and hedge
accounting
39
(0.4 )
5.3
(0.2)
Income from dividends
4
1.6
1.7
Total operating income
114.7
102.4
Administrative expenses
6
(111.1 )
(100.1 )
(78.1)
(70.6)
Depreciation and amortisation
16, 17
(7.6 )
(6.4 )
(2.5)
(2.2)
Operating profit be
fore impairments and provisions
34.1
29.6
Impairment reversals / (charges) on loans and advances to customers
12
(1.1 )
2.3
(0.9)
Impairment charges of tangible and intangible assets
16, 17
(0.3 )
-
(0.1)
Provisions for liabilities and charges
25
(21.0 )
(0.9 )
(20.7)
(0.3)
Profit
for the year before taxation
15.7
28.3
Taxation
8
(7.0 )
2.3
(5.2)
Profit a
fter taxation for the
financial year
18.0
23.1
Note
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Profit
for the
financial year
18.0
23.1
Other comprehensive income
Items that may be reclassified to Income Statement:
Cash flow hedges
Fair value movements recognised in equity
39
7.1
5.8
Amounts transferred to the Income Statement
39
(2.1 )
(0.4 )
(2.1)
(0.4)
Tax on net amounts recognised in equity
18
(1.3 )
(1.3 )
(1.3)
(1.3)
Financial assets measured at fair value through other
comprehensive income
Fair value changes recognised in equity
(0.4 )
(0.4)
0.6
Tax on net amounts recognised in equity
18
(0.2 )
0.2
(0.2)
Total items that may be reclassified to the Income Statement
3.5
4.5
Total comprehensive income for the
financial year
21.5
27.6
109
110
Income Statements
for the year ended 31 December 2024
Balance Sheets
as at 31 December 2024
Balance Sheets
as at 31 December 2024
These accounts were approved by the Board of Directors on 28 February 2025 and signed on its behalf by
Andrew Haigh
Chief Executive
Group
Society
2024
2023
2024
2023
ASSETS
Note
£m
£m
£m
£m
Cash and balances with the Bank of England
451.5
525.5
Loans and advances to credit institutions
10
85.1
95.8
Debt securities
11
602.3
615.0
Derivative financial instruments
37
47.9
40.6
Loans and advances to customers
12
5,287.8
4,856.8
Deemed loan asset
14
14.7
13.4
Fair value adjustments for hedged risk
39
(21.9 )
(13.2 )
(21.9)
(13.2)
Other assets
20
13.0
10.6
Current tax assets
3.1
3.1
Investments
15
42.7
41.8
Intangible assets
16
1.5
1.3
Property, plant and equipment
17
15.6
13.0
Deferred tax assets
18
8.4
7.7
Total assets
6,551.7
6,211.4
LIABILITIES
Due to Members
21
5,432.7
5,014.3
Due to other customers
22
241.0
262.3
Deposits from credit institutions
23
417.6
538.7
Derivative financial instruments
37
29.4
61.7
Other liabilities
24
26.2
20.4
Provisions for liabilities
25
11.2
0.5
Deferred tax liabilities
18
-
0.7
Subordinated liabilities
26
20.2
-
Subscribed capital
27
34.8
34.8
Total liabilities
6,213.1
5,933.4
Reserves
338.6
278.0
Total Members’ interest, equity and liabilities
6,551.7
6,211.4
Group
Society
2024
2023
2024
2023
Note
£m
£m
£m
£m
The notes on page 116 to 195 form part of these Accounts.
The notes on page 116 to 195 form part of these Accounts.
111
112
Statements of Movements in Members’ Interests
for the year ended 31 December 2024
Statements of Movements in Members’ Interests
for the year ended 31 December 2024
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
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
Group
General reserve
Fair value
through other
comprehensive
income
Cash flow hedge
reserve
Total reserves
£m
£m
£m
£m
At 1 January 2023
(2.7 )
Reclassification*
(0.4 )
Profit
for the year
Other comprehensive income
Net movement in fair value through other comprehensive income
Net movement in cash flow hedge reserve
Total other comprehensive income
Total comprehensive income
Transfer of engagements**
At 31 December 2023
Society
General reserve
Fair value
through other
comprehensive
income
Cash flow hedge
reserve
Total reserves
£m
£m
£m
£m
At 1 January 2023
237.9
0.4
(2.7)
235.6
Reclassification*
0.4
(0.4)
-
-
Profit
for the year
23.1
-
-
23.1
Other comprehensive income
Net movement in fair value through other comprehensive income
-
0.4
-
0.4
Net movement in cash flow hedge reserve
-
-
4.1
4.1
Total other comprehensive income
-
0.4
4.1
4.5
Total comprehensive income
23.5
-
4.1
27.6
Transfer of engagements**
14.8
-
-
14.8
At 31 December 2023
276.2
0.4
1.4
278.0
*The reclassification relates to historic tax amounts which have been previously realised in the Income Statement.
** Transfer of engagements arising on merger with Manchester Building Society in 2023.
*The reclassification relates to historic tax amounts which have been previously realised in the Income Statement.
** Transfer of engagements arising on merger with Manchester Building Society in 2023.
The notes on page 116 to 195 form part of these Accounts.
The notes on page 116 to 195 form part of these Accounts.
113
114
Net cash (outflows) / inflows
from operating activities
Corporation tax paid
Cash (outflows) / inflows
from operating activities
Cash inflows / (outflows)
from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Sale of property, plant and equipment
Aquisition of trade and assets
Cash acquired on transfer of engagements
Additional loans to subsidiary undertakings
Repayment of loans to subsidiary undertakings
Purchase of debt securities
Sale and maturity of debt securities
Net cash inflows / (outflows)
from investing activities
Cash inflows / (outflows)
from
financing activities
Interest paid on subscribed capital and subordinated
liabilities
Proceeds on issue of subordinated liabilities
Net proceeds of additional tier 1 capital
Capital payment for lease arrangements
Net cash inflows / (outflows)
from
financing activities
Net (decrease) / increase in cash
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Group
Society
Note
2024
2023
2024
2023
£m
£m
£m
£m
30
(110.6 )
(118.3)
249.8
(2.9 )
(7.0 )
(2.9)
(7.0)
(113.5 )
(121.2)
242.8
(4.7 )
(2.0 )
(2.8)
(1.1)
16
(4.6 )
(5.4 )
(0.5)
(0.4)
-
0.7
(0.1 )
(0.1)
-
-
42.7
15
(1.3)
(1.8)
15
0.3
0.6
11
(475.6 )
(501.5 )
(475.6)
(501.5)
11
485.4
330.0
(135.5 )
5.4
(130.8)
30
(4.3 )
(2.9 )
(4.3)
(2.9)
19.8
-
39.1
-
30
(2.3 )
(0.9 )
(2.3)
(0.9)
(3.8 )
52.3
(3.8)
(60.8 )
(63.5)
108.2
519.5
411.3
30
456.0
519.5
with International Financial Reporting Standards (IFRS)
as 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) Regulations 1998 as applicable
The financial statements have been prepared on the
historical cost basis, as modified by the revaluation o
f
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 all relevant
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.
statements in pound sterling, which is the Group’s
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
A summary of the Group’s principal accounting policies
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 on transactions are eliminated. The accounting
policies of subsidiaries are consistent with Group
Business combinations between mutual organisations
Where trading operations, assets and liabilities of
another mutual entity are merged into the business of
the Society, the Society assesses whether it’s a business
combination and then applies acquisition accounting
under IFRS 3, Business Combinations. All assets and
liabilities are incorporated into the Society’s Balance
Sheet at fair value on the date of merger. No
consideration is transferred for business combinations
between mutual entities, the deemed purchase
consideration is determined by measuring the fair value
of the acquired business. The amount of goodwill
recognised on merger being the difference between fair
value of the acquired assets and liabilities and the
deemed purchase consideration. Any goodwill
recognised would be an intangible asset on the Balance
Sheet and negative goodwill (or a gain on bargain
purchase) would be recognised in the Income
Statement. All transaction costs are expensed as
incurred. Any fair value adjustments made to the
acquired assets and liabilities are released to the Income
Statement over the assets or liabilities estimated life
where those assets are held at amortised cost. Where
the acquired assets are held at fair value going forward,
any change in the fair value after acquisition is
recognised in accordance with the Group’s relevant
accounting policy for that item.
Securitisations
The Group securitises mortgage loans by transferring
the beneficial ownership o
f 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 bene
ficial ownership o
f 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.
116
Cash Flow Statements
for the year ended 31 December 2024
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 and
management judgement are used to estimate the
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
Other income
Other income relates to income from contracts with
customers recognised under IFRS 15, Revenue from
Contracts with Customers. Revenue is recognised when
the Group transfers control over a product or service to
its customer. It 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.
Please see note 5 for details on income from contracts
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 per
formance 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 o
f 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.
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.
Financial assets held at fair value through other
comprehensive income
Under IFRS 9, where the contractual cash flow
characteristics of an asset re
flect SPPI, an asset may be
classified at ‘
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) and government gilts. These instruments meet
the definition o
f 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 re
flect 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.
Equity investments
The Group has a small portfolio of equity investments.
As return on these assets are not SPPI, they are held at
fair value, with fair value changes and any dividends
recognised in the Income Statement. Equity investments
are included in ‘Investments’ on the Balance Sheet.
The Group enters into 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.
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,
Financial Instruments: Recognition and Measurement,
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 amortised to the Income
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. However, when the hedged forecast
transaction results in the recognition of a non-
financial
asset or a non-financial liability, the gains and losses
previously recognised in other comprehensive income
and accumulated in equity are removed from equity and
included in the initial measurement of the cost of the
non-financial asset or non-financial liability. This trans
fer
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 gains less losses on financial instruments and
fit or loss
The Group’s equity release mortgage assets contractual
cash flows are not solely payments o
f principal and
interest and are therefore classi
fied as 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 o
f 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 when
no market driven data is available, are based on
118
117
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 recognised based on the interest rate implicit in
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 such collateral placed with counterparties as a
liquid asset for cash
financial assets
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.
The Group provides for expected credit losses 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, 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.
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.
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 re
flected in
the Income Statement.
A simplified approach is adopted
for trade receivables
and contract assets. These are not classified into
different stages and lifetime expected credit losses
are recognised.
See note 40 for details on the Group’s provisioning
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 measured
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. 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.
Statement in the period in which it is incurred.
Development expenditure is also charged to the
Income Statement, except where the Directors are
satisfied as to the technical, commercial and financial
viability of individual projects. Where all capitalisation
criteria specified in IAS 38, Intangible Assets, are met,
the expenditure directly attributable to a project
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.
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 o
f 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.
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:
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 asset and are included in the Income
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 discount factor to calculate the lease
liability and is included in interest payable and similar
120
119
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 pro
fit will be available against which
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 de
ficits are recognised
immediately with relevant actuarial re-measurements
recognised in the Statement of Comprehensive
Income. IAS 19 service costs are recognised in the
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 estimated 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 whose existence will be confirmed only
by the occurrence or non-occurrence of one or more
The operating segments disclosed (Member business
and Solutions business) 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
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 o
f 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
financial statements
there are no amendments to International Financial
Reporting Standards relevant to these accounts that are
mandatory for the
first time
for the
financial year
Developments and standards issued but not yet effective
There are a number of new or amended standards which
become effective in 2025 and beyond, as listed below.
Early adoption is permitted, but the Group does not
intend to adopt the standards before their
mandatory date.
Amendments to IAS 21, Lack of exchangeability are
effective from 1 January 2025.
Amendments to the Classification and Measurement o
f
Financial Instruments – Amendments to IFRS 9, Financial
Instruments and IFRS 7, Financial Instruments are
effective from 1 January 2026.
IFRS 18 Presentation and Disclosure in Financial
Statements, effective from 1 January 2027.
The amendments to accounting standards listed above
are not expected to have a significant impact on the
Group Accounts. IFRS 18 requires changes to the
presentation of primary
financial statements and
associated notes to the accounts, however, will not
impact the financial position o
f the Group.
applying accounting policies
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 signi
ficant 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 34.
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 details and sensitivity
analysis are provided in notes 40 to 42.
Pensions
In estimating the value of the pension scheme surplus or
deficit, management rely on a range o
f assumptions
including the most appropriate discount rate and
mortality rates, inflation, take up o
f 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. There remains significant uncertainty as to
whether the judgments 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 e
ffect on
the obligation cannot be made, however it is possible
that the DB pension obligation could be materially
increased. Further detail is found in note 19.
Judgements
Fair value of derivatives and
financial assets
Fair values 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 o
f valuations into the different levels.
Further details are provided in note 34.
Impairment of
financial assets
The modelling of impairment of mortgage assets
includes a range of management judgements, including
the Society’s definition o
f default, signi
ficant increase in
credit risk and the use of post model adjustments.
Further detail is provided in note 40.
Securitised assets
Management has judged that the transfer of the
beneficial interest in the loans trans
ferred from the
Society to the SPV does not result in a transfer of the
risks and rewards in relation to these loans. Therefore,
the transfer of the bene
ficial 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 climate change post model
adjustment in relation to the impact of climate change
on expected credit loss on loans and advances to
customers has been recognised during the year. Further
122
121
124
123
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
On loans and advances to customers held at amortised cost |
221.9 |
158.0 |
229.4 |
167.7 |
On debt securities |
||||
- interest and other income |
31.4 |
21.1 |
33.7 |
20.9 |
- profits net o f losses on realisation |
0.1 |
- |
0.1 |
- |
On other liquid assets |
||||
- interest and other income |
32.3 |
35.3 |
31.5 |
34.9 |
Interest recognised in respect of mortgages held at fair value |
11.4 |
11.1 |
11.4 |
11.1 |
Net income on derivatives hedging assets |
38.6 |
34.4 |
30.7 |
26.3 |
335.7 |
259.9 |
336.8 |
260.9 |
|
Interest receivable and other income includes £5.3m (2023: £5.3m) from
fixed income securities. Other than £2.0m (2023: £1.0m)
generated on loans originated in Spain and £1.6m interest income on supranational bonds, all interest receivable and other similar
| Group |
Society |
|||
| 2024 |
2023 |
2024 |
2023 |
|
| £m |
£m |
£m |
£m |
|
On financial liabilities held at amortised cost: |
||||
On amounts due to Members |
205.0 |
135.6 |
205.0 |
135.6 |
On subscribed capital |
3.4 |
2.9 |
3.4 |
2.9 |
On subordinated liabilities |
1.3 |
- |
1.3 |
- |
On deposits and other borrowings |
32.5 |
35.1 |
31.7 |
35.1 |
On finance leases |
0.3 |
0.2 |
0.3 |
0.2 |
242.5 |
173.8 |
241.7 |
173.8 |
|
On financial liabilities held at FVTPL: |
||||
Net expense / (income) on derivatives hedging liabilities |
1.3 |
(0.3) |
1.3 |
(0.3) |
243.8 |
173.5 |
243.0 |
173.5 |
|
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Other income |
||||
Savings management income |
47.3 |
43.6 |
- |
- |
Regulated advice services |
6.8 |
6.1 |
- |
- |
Fee and commission income |
1.8 |
1.7 |
1.8 |
1.7 |
Income recognised under IFRS 15 |
55.9 |
51.4 |
1.8 |
1.7 |
Other operating income |
0.2 |
0.4 |
12.4 |
12.0 |
56.1 |
51.8 |
14.2 |
13.7 |
|
Other income includes income from contracts with customers of £55.9m (2023: £51.4m) which is recognised under IFRS 15.
Further information is included in note 5.
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Other charges |
||||
Fee and commission expense |
0.2 |
0.2 |
0.2 |
0.2 |
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Dividend income |
||||
Received from equity investments |
0.2 |
0.3 |
- |
- |
Received from subsidiary undertakings |
- |
- |
1.6 |
1.7 |
0.2 |
0.3 |
1.6 |
1.7 |
|
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 intagroup income.
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Solutions Business |
||||
Savings management services recognised over time |
45.6 |
41.7 |
- |
- |
Savings management project and change services recognised over time |
1.5 |
1.0 |
- |
- |
IT services recognised over time |
0.2 |
0.9 |
- |
- |
47.3 |
43.6 |
- |
- |
|
Member Business |
||||
Regulated advice services recognised at a point in time |
2.6 |
2.4 |
- |
- |
Regulated advice services recognised over time |
4.2 |
3.7 |
- |
- |
Third party services recognised at a point in time |
1.7 |
1.6 |
1.7 |
1.6 |
Other services recognised over time |
0.1 |
0.1 |
0.1 |
0.1 |
8.6 |
7.8 |
1.8 |
1.7 |
|
Total revenue from contracts with customers |
55.9 |
51.4 |
1.8 |
1.7 |
In accordance with IFRS 8 the Group reports the following segments: Member business and Solutions business.
When the Group prepares financial in
formation for management, it disaggregates revenue by segment and
service type.
Details of intercompany income for the Society are included in note 31.
2. Unsatisfied long-term service contracts
The following table shows partially unsatis
fied per
formance obligations resulting from
fixed-price long-term
contracts at 31 December 2024 where the contract ends after the balance sheet date:
Group |
Solutions |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Aggregate amount of transaction price allocated to long-term savings |
||||
management projects |
2.6 |
3.2 |
5.0 |
6.7 |
Aggregate amount of transaction price allocated to long-term IT services |
0.7 |
0.7 |
0.7 |
0.7 |
3.3 |
3.9 |
5.7 |
7.4 |
|
In relation to savings management contracts, the Group expects to recognise approximately £2.1m of the unearned
amount in 2025, and £2.9m thereafter. In relation to IT contracts, the Group expects to recognise approximately
£0.6m of the unearned amount in 2025, and £0.1m thereafter.
3. Assets and liabilities related to contracts with customers
No contract assets or liabilities have been recognised by the Group (2023: £nil).
4. Descriptions of different types of income from
contracts with customers
Savings management services and savings management
project and change services
Savings management and savings management project
and change services are provided by the Society’s
subsidiary, Newcastle Strategic Solutions (NSSL).
NSSL provide outsourced savings management services
to the Society and other financial institutions. This
includes managing retail savings on behalf of the
Society and third parties. Revenue relating to this is
recognised as savings management services.
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.
Revenue for implementation, project, and change
services is recognised over time. Each milestone has a
corresponding transaction price which represents the
portion of the service provided to the customer at that
point in time.
Revenue for savings management services is recognised
over time in discrete monthly amounts which are
calculated based on actual work completed by NSSL in
the relevant month. Revenue for providing an ongoing
savings management service is recognised monthly in
line with the time elapsed in each individual contract.
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.
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. Revenue for all
services is recognised monthly in line with the time
elapsed in each individual contract. The amount of
revenue recognised for savings management systems
and data storage services is spread evenly throughout
the contractual term, 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 o
f 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 by the Society of introducing or
referring customers to a third party is complete once the
third party provider has agreed a sale with the customer.
Revenue for all services is recognised when cash is
received, which in all instances is in line with, or shortly
after, completion of the third party 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. The Society
receives consideration based on an invoicing schedule
agreed with each third party and 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 companies, can be found in
the specific company’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 upfront, the
timing and scope of work is agreed as part of each
customer’s contract.
The Group measures impairment losses on
receivable balances as of the end of the reporting
period at an amount equal to lifetime expected credit
losses in accordance with IFRS 9. Provisions held
against receivable balances at 31 December 2024 are
126
125
128
127
Group | Society | ||||
Note | 2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | ||
Staff costs | 7 | 79.0 | 71.0 | 52.4 | 43.3 |
Short term leases for land and buildings | |||||
- payable to third parties | 17 | 0.1 | 0.3 | 0.1 | 0.2 |
Other administrative expenses | 29.4 | 27.3 | 23.0 | 25.6 | |
Transaction costs | - | 1.3 | - | 1.3 | |
IT transformation costs | 2.6 | 0.2 | 2.6 | 0.2 | |
111.1 | 100.1 | 78.1 | 70.6 | ||
IT transformation costs are implementation costs of the Group’s newly implemented HR and
financial system, which
is a software as a service arrangement and does not meet the criteria to be capitalised.
these are included in other administrative expenses.
Group | Society | |||
2024 | 2023 | 2024 | 2023 | |
£000 | £000 | £000 | £000 | |
Fees payable to the Society's auditors for the audit of Society | ||||
| and consolidated financial statements | 791 | 816 | 791 | 816 |
Fees payable for the audit of subsidiaries | 107 | 81 | - | - |
Fees payable for other audit related assurance services | 125 | 119 | 125 | 119 |
Fees payable for non-audit services | 138 | 50 | 138 | 50 |
1,161 | 1,066 | 1,054 | 985 | |
Other audit related assurance services primarily consist of the half year review, interim pro
fit verifications and client
money assurance engagements.
The 2024 non-audit services relate to comfort letter work and other assurance services for the Society in relation to
issuances of capital instruments.
Group | Society | ||||
Note | 2024 | 2023 | 2024 | 2023 | |
£m | £m | £m | £m | ||
Wages and salaries | 63.2 | 56.9 | 44.3 | 35.9 | |
Social security costs | 6.9 | 6.2 | 3.5 | 3.1 | |
Pension costs for de fined contribution scheme | 8.9 | 7.9 | 4.6 | 4.3 | |
6 | 79.0 | 71.0 | 52.4 | 43.3 | |
amount to £2.3m (2023: £2.1m).
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 £5.6m (2023: £5.2m).
The monthly average number of persons employed, including Executive Directors, during the year was:
Group | Society | |||
2024 | 2023 | 2024 | 2023 | |
Full time | 1,468 | 1,353 | 604 | 560 |
Part time | 305 | 299 | 163 | 165 |
1,773 | 1,652 | 767 | 725 | |
Head Office | 1,539 | 1,442 | 562 | 538 |
Branch | 234 | 210 | 205 | 187 |
1,773 | 1,652 | 767 | 725 | |
130
129
Group |
Society |
||||
Note |
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
||
Current tax |
|||||
Current year |
1.9 |
6.9 |
0.8 |
5.7 |
|
Adjustments in respect of prior years |
(0.9) |
(1.2) |
(0.7) |
(1.6) |
|
Total current tax |
1.0 |
5.7 |
0.1 |
4.1 |
|
Deferred tax |
|||||
Current year |
(2.0) |
0.7 |
(2.3) |
1.0 |
|
Adjustments in respect of prior years |
0.2 |
0.6 |
(0.1) |
0.1 |
|
Total deferred tax |
18 |
(1.8) |
1.3 |
(2.4) |
1.1 |
Total taxation (credit) / expense in Income Statements |
(0.8) |
7.0 |
(2.3) |
5.2 |
|
Analysis of taxation for the year
The tax on the Group and Society profit be
fore taxation differs from the theoretical amount that would arise using
the weighted average tax rate applicable to profits as
follows:
Group |
Society |
|||
Analysis of taxation expense for the year |
2024 |
2023 |
2024 |
2023 |
£m |
£m |
£m |
£m |
|
Profit for the year before taxation |
15.7 |
29.1 |
15.7 |
28.3 |
Profit be fore taxation at the standard rate of corporation tax |
||||
| in the UK of 25.00% (2023: 23.52%) |
3.9 |
6.8 |
3.9 |
6.6 |
Effects of: |
||||
Non-taxable dividend income received |
- |
- |
(0.4) |
(0.4) |
Expenses not deductible for tax |
0.7 |
0.8 |
- |
0.8 |
Transfer pricing adjustment |
- |
- |
(0.7) |
(0.7) |
Timing differences |
- |
- |
- |
0.4 |
Recognition of deferred tax asset* |
(4.0) |
- |
(4.0) |
- |
Non-taxable income |
(0.7) |
- |
(0.4) |
- |
Adjustments in respect of prior years |
(0.7) |
(0.6) |
(0.7) |
(1.5) |
(0.8) |
7.0 |
(2.3) |
5.2 |
|
*Section 4(4) of The Mutual Societies (Transfers of Business) (Tax) Regulations 2009, which governs the tax treatment of building
society mergers; has been updated during the year. The change now allows 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 Newcastle Building Society Group. This resulted in a recognition of £4.0m of deferred tax assets in
the Society’s Balance Sheet and a corresponding credit to the Income Statement for taxation.
Factors affecting future tax charges
The Society has brought forward trading losses for tax purposes which are expected to affect future taxable pro
fits
The chief operating decision maker has been identi
fied as the Board o
f Directors. 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 of Directors. The operating segments used by the Group meet the de
finition o
f 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 pro
fit
before tax after the allocation of all central costs. Operating pro
fit be
fore 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 2024
Member |
Solutions |
||
Business |
Business |
Total |
|
£m |
£m |
£m |
|
Net interest income / (expense) |
94.0 |
(2.1) |
91.9 |
Other income and charges |
2.9 |
53.2 |
56.1 |
Fair value gains less losses on financial instruments and hedge accounting |
4.9 |
- |
4.9 |
Administrative expenses |
(65.6) |
(45.5) |
(111.1) |
Depreciation and amortisation |
(2.6) |
(5.0) |
(7.6) |
Operating profit be fore 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) |
15.4 |
0.3 |
15.7 |
|
Profit be fore taxation |
15.7 |
||
Taxation |
0.8 |
||
Profit a fter taxation |
16.5 |
Included within other income and charges is internal revenue of £11.8m and £13.1m in relation to the Member and Solutions
business respectively.
132
131
Year to 31 December 2023
Member |
Solutions |
||
Business |
Business |
Total |
|
£m |
£m |
£m |
|
Net interest income / (expense) |
88.0 |
(1.6) |
86.4 |
Other income and charges |
(8.6) |
60.5 |
51.9 |
Fair value gains less losses on financial instruments and hedge accounting |
(0.4) |
- |
(0.4) |
Administrative expenses |
(47.1) |
(53.0) |
(100.1) |
Depreciation and amortisation |
(2.4) |
(4.0) |
(6.4) |
Operating profit be fore impairments and provisions |
29.5 |
1.9 |
31.4 |
Impairment charges on loans and advances to customers |
(1.1) |
- |
(1.1) |
Provisions for liabilities and charges |
(0.3) |
(0.6) |
(0.9) |
28.1 |
1.3 |
29.4 |
|
Impairment charges on tangible and intangible assets |
(0.3) |
||
Profit be fore taxation |
29.1 |
||
Taxation expense |
(7.0) |
||
Profit a fter taxation |
22.1 |
Included within other income and charges is internal revenue of £11.2m and £12.6m in relation to the Member and Solutions
Repayable from the date of the Balance Sheet in the ordinary course of business as follows:
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
On demand |
21.6 |
22.9 |
4.9 |
8.9 |
In not more than 3 months |
80.2 |
86.9 |
80.2 |
86.9 |
101.8 |
109.8 |
85.1 |
95.8 |
|
No provisions are held against loans and advances to credit institutions (2023: £nil). Included within loans and advances to credit
Group and Society |
||
2024 |
2023 |
|
Transferable debt securities movement |
£m |
£m |
At 1 January |
615.0 |
433.7 |
Additions |
475.6 |
501.5 |
Disposals |
(42.2) |
(115.2) |
Maturities |
(443.2) |
(212.7) |
Other changes in value |
(2.9) |
7.7 |
At 31 December |
602.3 |
615.0 |
Transferable debt securities |
||
Issued by public bodies - listed |
252.6 |
248.9 |
Issued by other borrowers - unlisted |
349.7 |
366.1 |
602.3 |
615.0 |
|
In addition to the securities above, the Society has retained notes issued by Tyne Funding No.1 PLC, an entity controlled by
Group. These are presented net of the deemed loan from the issuing Special Purpose Vehicle. See note 14 for details on the
deemed loan.
The carrying amount of debt securities included a fair value hedge adjustment of £(1.6)m (2023: £2.1m).
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.
Unlisted securities are AAA rated holdings of residential mortgage-backed securities, covered bonds and supranational bonds.
134
133
Loans and advances to customers
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Loans fully secured on residential property |
5,259.3 |
4,827.0 |
5,257.7 |
4,823.9 |
Loans fully secured on land |
26.7 |
24.4 |
26.7 |
24.4 |
Other loans |
1.0 |
1.3 |
1.1 |
1.3 |
Gross loans and advances |
5,287.0 |
4,852.7 |
5,285.5 |
4,849.6 |
Allowance for losses on loans and advances |
(6.6) |
(7.6) |
(6.6) |
(7.4) |
Micro fair value hedge adjustments |
2.2 |
9.3 |
2.2 |
9.3 |
Effective interest rate adjustments |
6.5 |
5.3 |
6.5 |
5.3 |
Fair value adjustments |
0.2 |
- |
0.2 |
- |
5,289.3 |
4,859.7 |
5,287.8 |
4,856.8 |
|
At 31 December 2024 the Group had €30.1m of loans denominated in Euros (2023: €31.2m) with a carrying value of £24.9m
(2023: £27.1m).
Effective interest rate adjustments include a £1.5m liability relating to the fair value discount applied to acquired credit impaired
books (2023: £2.4m).
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 2024 |
6.2 |
1.4 |
7.6 |
Credit for the year |
(1.9) |
0.9 |
(1.0) |
Balance at 31 December 2024 |
4.3 |
2.3 |
6.6 |
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 for the year |
(1.7) |
0.9 |
(0.8) |
Balance at 31 December 2024 |
4.3 |
2.3 |
6.6 |
In addition to the movements in provisions in the tables above, there was a gain of £1.5m recognised in Impairment reversals on
loans and advances to customers in the Income Statement during the year in relation to redeemed loans that were classed as
Purchased or Originated Credit Impaired, acquired on merger with Manchester Building Society in 2023. Further information is
found in note 41.
Loans fully |
|||
secured on |
Loans fully |
||
residential |
secured on |
||
property |
land |
Total |
|
Group |
|||
£m |
£m |
£m |
|
Balance at 1 January 2023 |
3.5 |
3.1 |
6.6 |
Charge / (credit) for the year |
2.8 |
(1.7) |
1.1 |
Utilised during the year |
(0.1) |
- |
(0.1) |
Balance at 31 December 2023 |
6.2 |
1.4 |
7.6 |
Loans fully |
|||
secured on |
Loans fully |
||
residential |
secured on |
||
property |
land |
Total |
|
Society |
£m |
£m |
£m |
Balance at 1 January 2023 |
3.5 |
3.1 |
6.6 |
Charge / (credit) for the year |
2.6 |
(1.7) |
0.9 |
Utilised during the year |
(0.1) |
- |
(0.1) |
Balance at 31 December 2023 |
6.0 |
1.4 |
7.4 |
Equity release mortgage assets denominated in £
Included in loans and advances to customers secured on residential property is a balance of £146.7m (2023:
£161.3m) 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 £24.9m (2023: £27.1m)
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 pro
fit or loss. Details on the balances and valuation o
f the
equity release portfolio are included in notes 13 and 34.
Loans and advances to customers - securitisation
In 2021, the Society transferred bene
ficial ownership o
f a pool of mortgages of £282.7m to Tyne Funding No.1 PLC, a
securitisation vehicle. 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 on the securitisation.
No loans and securities were transferred to securitisation vehicles in the current or prior year.
Loans and advances to customers - write offs
There were no loans and advances to customers written off during the year (2023: £0.1m).
Further details of the Group’s provisioning methodology is given in note 40 and detailed analysis of expected credit
136
135
The Group’s equity release mortgage assets are accounted for as fair value through pro
fit 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 |
||||||
| 2024 |
2023 |
|||||
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 £ |
143.8 |
2.9 |
146.7 |
151.7 |
9.6 |
161.3 |
Denominated in € |
40.7 |
(15.8) |
24.9 |
47.7 |
(20.6) |
27.1 |
Total |
184.5 |
(12.9) |
171.6 |
199.4 |
(11.0) |
188.4 |
The gross mortgage balances above reflect the Group’s maximum pre collateral exposure to credit risk at 31
December. See note 34 for details of the movement in the fair value adjustment. The Group typically expects its
equity release mortgages to be repaid through sale of the underlying properties. Property collateral of £323.6m
(2023: £403.1m) is held against the Group’s equity release exposures denominated in £. By their nature, equity
release mortgages are not considered to hold a pre-determined maturity date.
At 31 December 2024 the Group had €49.2m (2023: €54.9m) of equity release mortgages denominated in Euros,
against which €54.2m (2023: €56.8m) collateral is held.
The fair value is the present value of the forecast portfolio cash
flows less the value o
f the no-negative equity
guarantee, which is calculated using an option pricing model. See note 34 for details.
Against equity release assets, the following income and charges have been recognised through the
Income Statement:
Interest |
Fair value |
|
income |
change |
|
£m |
£m |
|
31 December 2024 |
11.4 |
(5.8) |
31 December 2023 |
11.1 |
4.4 |
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 o
f 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 34.
For fixed reversion contracts, the effective interest rate is considered to be the rate implicit in the mortgage
contract. The balances recognised in respect to fixed reversion mortgages included in the total above are
as follows:
Reversion |
Interest |
||
value |
Book value |
income |
|
£m |
£m |
£m |
|
31 December 2024 |
9.2 |
7.3 |
0.5 |
31 December 2023 |
12.5 |
10.4 |
0.6 |
The Group’s equity release books are closed to new entrants with limited further advances available to existing
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. All loan notes have been
purchased by the Society and 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 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 by Tyne Funding No.1 PLC, 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 net deemed loan liability presented on the Balance Sheet consists of the following items:
Society |
||
2024 |
2023 |
|
£m |
£m |
|
Loan notes |
190.2 |
227.5 |
Consideration received for transfer of mortgages |
(183.6) |
(223.6) |
Net value of derivatives integral to transaction |
8.1 |
9.5 |
14.7 |
13.4 |
|
At the Balance Sheet date, the securitised mortgage loans had a book value of £183.6m (2023: £223.6m). Class A
notes have a coupon rate of SONIA + 58bps and a call date of 25 November 2026.
In the Accounts, any derivatives associated with the transaction are presented gross in assets and liabilities within
138
137
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Equities |
1.6 |
1.9 |
0.1 |
0.2 |
Securities |
- |
- |
42.6 |
41.6 |
1.6 |
1.9 |
42.7 |
41.8 |
|
Investments in equities
Equity investments relate to the Society’s holdings in Abrdn PLC after demutualisation of Standard Life, and
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 pro
fit or loss. See note 34
for details.
Investment in subsidiary undertakings |
Shares |
Loans |
Total |
Cost |
£m |
£m |
£m |
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 |
Investment in subsidiary undertakings |
Shares |
Loans |
Total |
Cost |
£m |
£m |
£m |
At 1 January 2023 |
3.9 |
34.5 |
38.4 |
Additions |
2.0 |
1.8 |
3.8 |
Repayments received |
- |
(0.6) |
(0.6) |
Balance at 31 December 2023 |
5.9 |
35.7 |
41.6 |
Provisions |
|||
At 1 January 2023 and 31 December 2023 |
- |
- |
- |
Net book amount at 31 December 2023 |
5.9 |
35.7 |
41.6 |
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 other of the above 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.
The entire share capital of MBS (Mortgages) Limited was transferred to Newcastle Building Society as part of the
transfer of engagements on 1 July 2023. MBS (Mortgages) Limited is 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 31 Related Parties.
During the year, the Society received dividends from subsidiary undertakings totalling £1.6m (2023: £1.7m) which
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 in
fluence 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 (SPV) to facilitate
the securitisation of a mortgage pool previously owned by the Society, see note 14 for details. The entity’s
financial
140
139
Group
Internally |
|||||
developed |
Internally |
||||
software: |
development |
Acquired |
|||
Purchased |
work in |
software: in |
customer |
||
software |
progress |
use |
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 |
Group
Internally |
|||||
developed |
Internally |
||||
software: |
development |
Acquired |
|||
Purchased |
work in |
software: in |
customer |
||
software* |
progress |
use* |
lists |
Total* |
|
Cost |
|||||
£m |
£m |
£m |
£m |
£m |
|
At 1 January 2023 (restated)* |
11.7 |
2.5 |
6.0 |
0.4 |
20.6 |
Additions |
1.3 |
4.1 |
- |
- |
5.4 |
Transfers |
- |
(3.5) |
3.5 |
- |
- |
Disposals |
(0.3) |
- |
- |
- |
(0.3) |
At 31 December 2023 (restated)* |
12.7 |
3.1 |
9.5 |
0.4 |
25.7 |
Accumulated depreciation |
|||||
At 1 January 2023 (restated)* |
8.7 |
- |
1.4 |
0.3 |
10.4 |
Charge for the year |
0.9 |
- |
1.6 |
0.1 |
2.6 |
Impairment |
- |
- |
0.2 |
- |
0.2 |
Disposals |
(0.3) |
- |
- |
- |
(0.3) |
At 31 December 2023 (restated)* |
9.3 |
- |
3.2 |
0.4 |
12.9 |
Net book amount 31 December 2023 |
3.4 |
3.1 |
6.3 |
- |
12.8 |
(restated)*
*The opening balances for cost and accumulated depreciation have been restated during the year following a review of historic
balances. There is no impact on the overall net book value of Group or Society intangible assets.
Society
Internally |
|||||
developed |
Internally |
||||
software: |
development |
Acquired |
|||
Purchased |
work in |
software: in |
customer |
||
software |
progress |
use |
lists |
Total |
|
Cost |
|||||
£m |
£m |
£m |
£m |
£m |
|
At 1 January 2024 |
4.0 |
- |
- |
- |
4.0 |
Additions |
0.5 |
- |
- |
- |
0.5 |
Transfers |
- |
- |
- |
- |
- |
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 |
Society
Internally |
|||||
developed |
Internally |
||||
software: |
development |
Acquired |
|||
Purchased |
work in |
software: in |
customer |
||
| Cost |
software* |
progress |
use |
lists |
Total* |
£m |
£m |
£m |
£m |
£m |
|
At 1 January 2023 (restated)* |
3.9 |
- |
- |
- |
3.9 |
Additions |
0.4 |
- |
- |
- |
0.4 |
Transfers |
- |
- |
- |
- |
- |
Disposals |
(0.3) |
- |
- |
- |
(0.3) |
At 31 December 2023 (restated)* |
4.0 |
- |
- |
- |
4.0 |
Accumulated depreciation |
|||||
At 1 January 2023 (restated)* |
2.8 |
- |
- |
- |
2.8 |
Charge for the year |
0.2 |
- |
- |
- |
0.2 |
Disposals |
(0.3) |
- |
- |
- |
(0.3) |
At 31 December 2023 (restated)* |
2.7 |
- |
- |
- |
2.7 |
Net book amount 31 December 2023 |
|||||
1.3 |
- |
- |
- |
1.3 |
(restated)*
*The opening balances for cost and accumulated depreciation have been restated during the year following a review of historic
balances. There is no impact on the overall net book value of Group or Society intangible assets.
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 classi
fied as work in progress until the so
ftware is ready to use. Once it is
ready to use, it is reclassified as internally developed so
ftware in use and amortised over its useful economic life.
Acquired customer lists
Acquired customer lists relate to customer lists acquired by Newcastle Financial Advisers. In 2019, Newcastle
Financial Advisers bought Fidelis Financial Solutions Limited and integrated its trade and assets into its own
operations. In 2020, the customer list of Carter James Associates Limited was acquired and integrated into
Newcastle Financial Advisers. In 2024, the customer list of Keith Dyson Financial Consulting was acquired and
142
141
Equipment, |
|||||
fixtures, |
|||||
Group |
Leasehold |
fittings |
|||
Freehold |
land and |
and motor |
Investment |
||
buildings |
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 |
Lease remeasurement |
- |
(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 |
Equipment, |
|||||
fixtures, |
|||||
Group |
Leasehold |
fittings |
|||
Freehold |
land and |
and motor |
Investment |
||
buildings* |
buildings* |
vehicles* |
property |
Total* |
|
Cost |
|||||
£m |
£m |
£m |
£m |
£m |
|
At 1 January 2023 (restated)* |
3.1 |
22.8 |
28.0 |
1.1 |
55.0 |
Additions |
- |
4.8 |
2.0 |
- |
6.8 |
Lease remeasurement |
- |
0.2 |
- |
- |
0.2 |
Disposals |
- |
(1.1) |
(1.0) |
- |
(2.1) |
At 31 December 2023 (restated)* |
3.1 |
26.7 |
29.0 |
1.1 |
59.9 |
Accumulated depreciation |
|||||
At 1 January 2023 (restated)* |
1.0 |
5.1 |
18.8 |
1.0 |
25.9 |
Charge for the year |
0.1 |
1.5 |
2.2 |
- |
3.8 |
Impairment |
- |
0.1 |
- |
- |
0.1 |
Disposals |
- |
(0.4) |
(1.0) |
- |
(1.4) |
At 31 December 2023 (restated)* |
1.1 |
6.3 |
20.0 |
1.0 |
28.4 |
Net book amount 31 December 2023 (restated)* |
2.0 |
20.4 |
9.0 |
0.1 |
31.5 |
*The opening balances for cost and accumulated depreciation have been restated during the year following a review of historic
balances. There is no impact on the overall net book value of Group or Society property, plant or equipment.
Equipment, |
|||||
fixtures, |
|||||
| Society |
Leasehold |
fittings |
|||
Freehold |
land and |
and motor |
Investment |
||
buildings |
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 |
Lease remeasurement |
- |
(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 |
Equipment, |
|||||
fixtures, |
|||||
| Society |
Leasehold |
fittings |
|||
Freehold |
land and |
and motor |
Investment |
||
buildings* |
buildings* |
vehicles* |
property |
Total* |
|
Cost |
£m |
£m |
£m |
£m |
£m |
At 1 January 2023 (restated)* |
3.1 |
7.8 |
14.7 |
1.1 |
26.7 |
Additions |
- |
4.8 |
0.7 |
- |
5.5 |
Lease remeasurement |
- |
0.2 |
- |
- |
0.2 |
Disposals |
- |
(1.0) |
(0.1) |
- |
(1.1) |
At 31 December 2023 (restated)* |
3.1 |
11.8 |
15.3 |
1.1 |
31.3 |
Accumulated depreciation |
|||||
At 1 January 2023 (restated)* |
1.0 |
4.0 |
10.7 |
1.0 |
16.7 |
Charge for the year |
0.1 |
1.1 |
0.8 |
- |
2.0 |
Impairment |
- |
0.1 |
- |
- |
0.1 |
Disposals |
- |
(0.4) |
(0.1) |
- |
(0.5) |
At 31 December 2023 (restated)* |
1.1 |
4.8 |
11.4 |
1.0 |
18.3 |
Net book amount 31 December 2023 (restated)* |
2.0 |
7.0 |
3.9 |
0.1 |
13.0 |
*The opening balances for cost and accumulated depreciation have been restated during the year following a review of historic
balances. There is no impact on the overall net book value of Group or Society property, plant or equipment.
144
143
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 other liabilities (note 24).
Lease liabilities are expected to amortise as follows:
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Within one year |
1.1 |
1.1 |
1.1 |
1.1 |
In one to five year |
3.0 |
2.5 |
3.0 |
2.5 |
In more than five years |
3.4 |
4.1 |
3.4 |
4.1 |
7.5 |
7.7 |
7.5 |
7.7 |
|
The following charges are included in the Income Statement in respect to leases:
Group |
Society |
||||
Note |
|||||
2024 |
2023 |
2024 |
2023 |
||
£m |
£m |
£m |
£m |
||
Depreciation of right of use assets included in administrative |
|||||
| expenses |
1.2 |
1.1 |
1.2 |
1.1 |
|
Interest charges on lease liabilities |
30 |
0.3 |
0.2 |
0.3 |
0.2 |
Expenses relating to short term and low value leases |
|||||
| included in administrative expenses - payable to third parties |
6 |
0.1 |
0.3 |
0.1 |
0.2 |
1.6 |
1.6 |
1.6 |
1.5 |
||
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
Included within investment property are freehold and leasehold commercial buildings, which are owned by the
Society and Group, and held to earn rental income. The transfer in the prior year relates to a property which was
held for sale at the Balance Sheet date. See note 17 for details.
Management consider the purchase price less depreciation to represent a fair value for properties held. No formal
third party valuation of the Society or Group investment property holdings was undertaken during 2024 with the
properties managed to facilitate continued operation (via rental to third parties or otherwise) and not towards view
of speculative sale.
During 2024 rental income from investment properties of £0.1m (2023: £0.1m) was recognised by the Group and
the Society. Directly attributable operating expenses to investment property are not measured as both Group and
The movement on the deferred tax account is shown below.
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
At 1 January |
5.8 |
4.5 |
7.0 |
5.7 |
Income Statement expense |
2.0 |
(0.7) |
2.3 |
(1.0) |
Prior year adjustment |
(0.2) |
(0.6) |
0.1 |
(0.1) |
Arising on transfer of engagements |
- |
4.1 |
- |
4.1 |
Credited on items taken directly through reserves |
(1.1) |
(1.5) |
(1.1) |
(1.5) |
Other |
0.3 |
- |
0.1 |
(0.2) |
At 31 December |
6.8 |
5.8 |
8.4 |
7.0 |
Deferred tax assets |
||||
Deferred tax asset to be recovered in less than 12 months |
0.3 |
0.3 |
0.3 |
0.3 |
Deferred tax asset to be recovered in more than 12 months |
8.1 |
7.2 |
8.1 |
7.4 |
8.4 |
7.5 |
8.4 |
7.7 |
|
Deferred tax liabilities |
||||
Deferred tax liabilities to be recovered in less than 12 months |
(0.2) |
(0.2) |
- |
- |
Deferred tax liabilities to be recovered in more than 12 months |
(1.4) |
(1.5) |
- |
(0.7) |
(1.6) |
(1.7) |
- |
(0.7) |
|
Charge |
|||||
Group |
Arising on |
credited |
Other |
||
transfer of |
to Income |
Comprehensive |
|||
2023 |
engagements |
Statement |
Income |
2024 |
|
£m |
£m |
£m |
£m |
£m |
|
Trading losses |
2.6 |
- |
(0.8) |
- |
1.8 |
Temporary timing differences |
(0.7) |
4.0 |
(0.5) |
- |
2.8 |
Adjustments relating to historic changes in accounting |
|||||
| policies |
4.9 |
- |
(0.7) |
- |
4.2 |
Equity investments held at fair value through the income |
|||||
| statement |
(0.4) |
- |
0.1 |
- |
(0.3) |
Debt securities held at fair value through other |
|||||
| comprehensive income |
(0.2) |
- |
- |
0.2 |
- |
Cash flow hedge accounting held at fair value through |
|||||
| other comprehensive income |
(0.4) |
- |
- |
(1.3) |
(1.7) |
5.8 |
4.0 |
(1.9) |
(1.1) |
6.8 |
Charge |
|||||
Society |
Arising on |
credited |
Other |
||
transfer of |
to Income |
Comprehensive |
|||
2023 |
engagements |
Statement |
Income |
2024 |
|
£m |
£m |
£m |
£m |
||
Trading losses |
2.6 |
- |
(0.8) |
- |
1.8 |
Temporary timing differences |
0.1 |
4.0 |
(0.1) |
- |
4.0 |
Adjustments relating to historic changes in accounting |
|||||
| policies |
4.9 |
- |
(0.6) |
- |
4.3 |
Debt securities held at fair value through other |
|||||
| comprehensive income |
(0.2) |
- |
- |
0.2 |
- |
Cash flow hedge accounting held at fair value through |
|||||
(0.4) |
- |
- |
(1.3) |
(1.7) |
|
| other comprehensive income |
7.0 |
4.0 |
(1.5) |
(1.1) |
8.4 |
146
145
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 merger with Manchester
Building Society are unwound over a period of 6 years from the merger date. No changes to the rate of corporation
tax have been announced.
Unrecognised deferred tax assets
The following table summarises the unrecognised deferred tax assets.
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Unrecognised deferred tax assets |
2.0 |
5.2 |
- |
3.2 |
Newcastle Building Society
Section 4(4) of The Mutual Societies (Transfers of Business) (Tax) Regulations 2009, which governs the tax
treatment of building society mergers; has been updated during the year. The change now allows 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 Newcastle Building Society Group. This resulted in a recognition of
£4.0m of deferred tax assets in the Society’s Balance Sheet.
MBS Mortgages Limited
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 £8.1m, 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 pro
fitable,
and future pro
fits that the tax losses could be offset against are not currently considered su
fficiently certain to
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 bene
fits 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 o
f 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 o
f future bene
fit 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 o
f no
more than 5% pa). The valuation method used is known as the Projected Unit Method.
The approximate overall duration of the Scheme’s de
fined benefit obligation at 31 December 2024 was 11 years
(2023: 13 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. This valuation revealed the
Scheme had no funding de
ficit relative to the Scheme’s statutory
funding objective and so no de
ficit reduction
contributions are payable. However, the Society has agreed to pay contributions of currently £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 2024 by a quali
fied
independent actuary. The assumptions used for the IAS 19 year end valuation are as follows:
Significant actuarial assumptions
2024 |
2023 |
|
Discount rate |
5.50% |
4.60% |
RPI Inflation |
3.15% |
3.00% |
CPI Inflation: |
||
| Before 2030 |
RPI less 1.0% pa |
RPI less 1.0% pa |
| From 2030 |
RPI less 0.0% pa |
RPI less 0.0% pa |
Mortality assumptions |
||
SAPS ‘S3’CMI 2023 |
SAPS ‘S3’CMI 2022 [1.25%] |
|
Mortality (post-retirement) |
[1.25%] (yob) |
(yob) |
Other actuarial assumptions |
||
RPI pension increases |
3.05% |
2.95% |
Pension increases in deferment |
2.65% |
2.50% |
Life expectancies (in years) |
||
For an individual aged 62 |
||
Male |
24.0 years |
24.0 years |
Female |
26.7 years |
26.7 years |
At 62 for an individual aged 42 in 2024
Male
25.4 years
25.4 years
Female
28.1 years
28.1 years
148
147
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 re
ference
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 signi
ficant
source of Balance Sheet volatility other than signi
ficant changes in credit spreads.
Inflation risks:
A significant proportion o
f the Scheme’s de
fined benefit obligation is linked to inflation,
therefore higher in
flation 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 in
flation rate changes.
Mortality risk:
If Scheme members live longer than expected, the Scheme’s bene
fits 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.
Sensitivity Analysis | Change in assumption | Change in defined |
benefit obligations | ||
Assumptions | ||
Discount rate | + / - 0.5% | - 5% / + 6% |
Inflation | + / - 0.5% | + 2% / - 2% |
Assumed life expectancy | + / - 1 year | + 3% / - 3% |
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
2024 | 2023 | |
% | % | |
Equities | 12.0 | 9.2 |
Diversified growth funds | 11.0 | 8.8 |
Corporate bonds | 29.0 | 29.8 |
Fixed interest and index linked gilts | 45.0 | 49.0 |
Annuities | 1.0 | 0.7 |
Cash | 2.0 | 2.5 |
Total | 100.0 | 100.0 |
Actual return on assets over the period | (3.4) | 2.8 |
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 diversi
fied
fund with
underlying assets of equities, bonds, commodities and listed infrastructure, property, private equity and global
real estate companies.
Reconciliations to the Balance Sheet
2024 | 2023 | |
£m | £m | |
Total value of assets | 68.1 | 76.2 |
Present value of de fined benefit obligations | (64.2) | (71.9) |
Funded status | 3.9 | 4.3 |
Adjustment in respect of minimum funding requirement | (3.9) | (4.3) |
Pension asset recognised in the Balance Sheet before allowance for deferred tax | - | - |
Analysis of changes in the value of the de
fined benefit obligation over the period
2024 | 2023 | |
£m | £m | |
Value of de fined benefit obligations at start o f the period | 71.9 | 70.6 |
Interest cost | 3.2 | 3.4 |
Benefits paid | (4.1) | (4.2) |
Actuarial gains / (losses): experience differing from that assumed | (0.4) | 0.8 |
Actuarial gains: changes in demographic assumptions | (0.1) | (1.2) |
Actuarial (gains) / losses: changes in financial assumptions | (6.3) | 2.5 |
Value of de fined benefit obligation at end o f period | 64.2 | 71.9 |
Analysis of changes in the value of the Scheme assets over the period
2024 | 2023 | |
£m | £m | |
Market value of assets at start of period | 76.2 | 77.8 |
Interest income | 3.4 | 3.7 |
Actual return on assets less interest | (6.8) | (0.9) |
Employer contributions | 0.3 | 0.3 |
Benefits paid | (4.1) | (4.2) |
Administration costs | (0.9) | (0.5) |
Market value of assets at end of period | 68.1 | 76.2 |
Amount recognised in Income Statement
2024 | 2023 | |
£m | £m | |
Administration costs | 0.3 | 0.5 |
Amount charged to Income Statement | 0.3 | 0.5 |
Amount recognised in Income Statements
2024 | 2023 | |
£m | £m | |
Actuarial losses on defined benefit obligation | 6.8 | (2.1) |
Actual return on assets less interest | (7.4) | (0.9) |
Limit on recognition of assets less interest | 0.6 | 3.0 |
Amounts recognised in Statement of Comprehensive Income | - | - |
The total administration costs, including current service costs, incurred during the year totalled £0.9m (2023:
£0.5m), of which £0.3m (2023: £0.3m) was paid for by the Society and therefore recognised in the Society’s
Income Statement. The remaining £0.6m (2023: £0.2m) 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.
150
149
Guaranteed minimum pension equalisation
On 26 October 2018, the High Court ruled in the Lloyds Banking Group case that trustees are under a duty to make
sure that equal benefits are paid, including where these benefits are in the
form of guaranteed minimum pension
(GMP). As a result, all schemes with GMP rights will have to act to allow for equalisation of bene
fits
for the effect of
unequal GMPs. This is known as GMP equalisation. As a result of this judgment, it is generally expected companies
make an allowance for any increase in the de
fined benefit obligation that they expect as a result o
f GMP
equalisation. As per previous years, an approximate allowance for the impact of GMP equalisation of 0.5% of the
defined benefit obligation has been made. This considers current members o
f the Scheme only.
Barber Equalisation
On 17 May 1990, the Court of Justice of the European Union ruled that occupational pensions were deferred pay
and, as such, schemes had to treat men and women equally. This judgement was incorporated into UK domestic
law and applies for any accrual from 17 May 1990 until bene
fits were subsequently equalised at age 62. The Scheme
equalised benefits on 25 September 1995. The relevant equalisation period is there
fore from 17 May 1990 to 25
September 1995. The scheme lawyers have identified deficiencies with the documentation o
f this, which has led to
the need for the Scheme bene
fits to be rectified and arrears paid. The scheme actuary has set up a reserve
for the
Barber Equalisation, equivalent to 1% of total liabilities.
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 to these members always net to £nil. At 30
June 2024 (being the latest data available), they were estimated to be £0.4m (2023: £0.5m). 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.
There remains significant uncertainty as to whether the judgments will result in additional liabilities
for UK pension
schemes and it is possible that the Department of Work & Pensions will introduce legislation to allow changes to be
certified retrospectively. In case no retrospective regulation is being implemented, a detailed review o
f historical
documentation will be needed to determine whether any changes made by the Scheme were invalid. Such a review
will take some time to complete. In cases where invalid changes to the Scheme were made and these changes
resulted in a reduction in the scheme liabilities, the pension obligations could increase as a result. However, none of
the information the Directors currently have available indicates that such changes were made or rule out that such
changes were made.
As outlined in note 1, the Society cannot be certain of the potential implications of the Virgin Media Limited v NTL
Pension Trustees II Limited case (if any) and therefore a sufficiently reliable estimate of any e
ffect on the obligation
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Receivable from subsidiary undertakings |
- |
- |
8.9 |
2.8 |
Prepayments and accrued income |
11.5 |
13.8 |
3.6 |
5.3 |
Other receivables |
5.5 |
6.1 |
0.5 |
2.5 |
17.0 |
19.9 |
13.0 |
10.6 |
|
Group and Society |
||
2024 |
2023 |
|
£m |
£m |
|
Held by individuals |
5,432.6 |
5,014.2 |
Other shares |
0.1 |
0.1 |
5,432.7 |
5,014.3 |
|
Group and Society |
||
2024 |
2023 |
|
£m |
£m |
|
Due to other customers |
241.0 |
262.3 |
241.0 |
262.3 |
|
Group and Society |
||
2024 |
2023 |
|
£m |
£m |
|
Amounts owed to credit insitutions |
417.6 |
538.7 |
417.6 |
538.7 |
|
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Amounts payable to subsidiary undertakings |
- |
- |
9.0 |
3.4 |
Lease liabilities |
7.5 |
7.4 |
7.5 |
7.4 |
Other creditors |
3.7 |
3.3 |
2.1 |
1.6 |
Accruals and deferred income |
11.4 |
12.4 |
7.6 |
8.0 |
22.6 |
23.1 |
26.2 |
20.4 |
|
Group |
Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Opening provision at 1 January |
0.6 |
0.6 |
0.5 |
0.5 |
New provisions for the year |
22.2 |
0.9 |
21.9 |
0.3 |
Amounts utilised / transferred during the year |
(11.6) |
(0.9) |
(11.2) |
(0.3) |
Closing provision at 31 December |
11.2 |
0.6 |
11.2 |
0.5 |
During the year the Society committed to providing voluntary financial support to help customers whose trusts are
affected by the actions and subsequent collapse of Philips Trust. The support offered is entirely voluntary and there
is no legal or regulatory requirement to provide financial support.
A provision of £21.2m was recognised during the year in respect of this based on the expected cost of claims
received by the scheme administrator by the claim deadline, and including legal and scheme administrative costs.
At 31 December 2024, £10.1m of payments have been made to affected customers, with remaining payments
expected to be made in the first hal
f of 2025. In addition, £1.2m was received from the administrators of Philips
Trust from the recoveries made from Philips Trust investments, which has been netted off the cost of the provision
in the Income Statement. Additional recoveries are being sought to reimburse the Society’s costs of providing
support to affected customers, with additional recoveries expected in 2025, which have not been recognised in the
financial statements in line with accounting standards. Included within amounts utilised during the year is £0.6m o
f
costs incurred to 31 December 2024 in respect of administration of the scheme.
At 31 December 2024, the remaining provision being held in respect of this scheme was £10.5m. Subsequent to the
year end, additional payments of £6.8m have been made to affected customers.
152
151
Group and Society |
||
2024 |
2023 |
|
£m |
£m |
|
Fixed rate subordinated notes 2034 – 12.5% |
20.2 |
- |
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
Group and Society |
||
2024 |
2023 |
|
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 |
5.2 |
5.2 |
34.8 |
34.8 |
|
The 12.625%, 8.000% and 10.750% 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 o
f 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 o
f
interest, as the only instance where interest could not be paid on the instruments would be where capital levels are
£40m of Perpetual Contingent Convertible Additional Tier 1 (AT 1) Capital Securities were issued by the Society in
December 2024 with the costs of issuance of £0.9m (net of VAT) being recognised in the Society’s general reserve.
These AT 1 instruments pay a fully discretionary, non-cumulative
fixed coupon at an initial rate o
f 14% per annum.
The rate will reset on 6 June 2030 and every five years therea
fter. 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.
The instruments are perpetual, having no fixed maturity date and are repayable at the option o
f 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 entitled to any share in any final surplus upon a winding up or final dissolution o
(i)
Until 11 June 1996, under Section 22 of the Building Societies Act 1986, the Society had an obligation to
discharge the liabilities of its subsidiary undertakings insofar as they were unable to discharge the liabilities out
of their own assets.
The Society had £2.2m of capital commitments for the acquisition of property, plant, and equipment at 31
December 2024 in relation to branch refurbishments. Commitments in respect to leases classi
fied as short term
or small under IFRS 16 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 (2023: £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.
Group and Society |
||
2024 |
2023 |
|
£m |
£m |
|
Irrevocable undrawn committed loan facilities |
291.2 |
208.0 |
154
153
Group |
Society |
|||
Reconciliation of pro fit be fore taxation to net cash (out flows) / inflows |
||||
from operating activities |
2024 |
2023 |
2024 |
2023 |
£m |
£m |
£m |
£m |
|
Profit be fore taxation |
15.7 |
29.1 |
15.7 |
28.3 |
Depreciation and amortisation |
7.6 |
6.4 |
2.5 |
2.2 |
Interest on subscribed capital and subordinated liabilities |
4.7 |
2.9 |
4.7 |
2.9 |
(Increase) / decrease in derivative financial instruments |
(30.9) |
52.0 |
(32.5) |
45.1 |
Interest payment for finance lease arrangements |
(0.3) |
(0.2) |
(0.3) |
(0.2) |
Net cash (outflows) / inflows be fore changes in operating assets and |
||||
| liabilities |
(3.2) |
90.2 |
(9.9) |
78.3 |
Increase in loans and advances to customers |
(429.5) |
(492.6) |
(431.0) |
(492.8) |
Decrease / (increase) in fair value adjustments for hedged risk |
8.7 |
(48.0) |
8.7 |
(48.0) |
Decrease in cash ratio deposits |
14.5 |
1.2 |
14.5 |
1.2 |
Decrease / (increase) in cash collateral pledged |
6.7 |
(3.1) |
6.7 |
(3.1) |
Increase in shares |
418.4 |
672.8 |
418.4 |
672.8 |
(Decrease) / increase in amounts due to other customers and deposits |
||||
| from credit institutions |
(142.4) |
42.3 |
(142.4) |
42.3 |
(Increase) / decrease in deemed loan |
- |
- |
(1.3) |
2.4 |
Decrease / (increase) in other assets, prepayments and accrued income |
3.2 |
(1.5) |
(2.3) |
(1.1) |
(Decrease) / increase in other liabilities |
(0.2) |
0.4 |
6.1 |
(0.4) |
Increase in provisions |
10.6 |
- |
10.7 |
- |
Other non-cash movements |
2.6 |
(9.8) |
3.5 |
(1.8) |
Net cash (outflows) / inflows from operating activities |
(110.6) |
251.9 |
(118.3) |
249.8 |
Cash and cash equivalents |
||||
Cash and balances with the Bank of England |
451.5 |
525.5 |
451.5 |
525.5 |
Less Bank of England cash ratio deposit |
- |
(14.5) |
- |
(14.5) |
Loans and advances to banks repayable on demand |
21.2 |
22.5 |
4.5 |
8.5 |
At 31 December |
472.7 |
533.5 |
456.0 |
519.5 |
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
IAS 7, Statement of cash
flows requires enhanced disclosures around changes in liabilities
from
financing activities
arising from cash
flows and non-cash flows.
Changes of liabilities arising from
financing liabilities in the year were as
follows:
Group and Society |
|||||||||
Non-cash changes |
Cashflows |
||||||||
Balance |
Accrued |
Balance |
|||||||
sheet 31 |
interest |
Interest |
Proceeds |
Capital |
sheet 31 |
||||
December |
Lease |
Lease |
/ lease |
payment |
from |
repayment |
December |
||
2023 |
New leases |
remeasurements* |
disposal |
charge |
flows |
issuance |
flows |
2024 |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Subordinated |
|||||||||
liabilities and |
|||||||||
subscribed |
35.2 |
- |
- |
- |
4.7 |
(4.0) |
19.8 |
- |
55.7 |
capital |
|||||||||
Lease liabilities |
7.7 |
2.1 |
(0.3) |
- |
0.3 |
(0.3) |
- |
(2.3) |
7.2 |
| Group and Society |
|||||||||
| Non-cash changes |
Cashflows |
||||||||
Balance |
Accrued |
Balance |
|||||||
sheet 31 |
Acquired on |
interest |
Interest |
Capital |
sheet 31 |
||||
December |
transfer of |
Lease |
Lease |
/ lease |
payment |
repayment |
December |
||
2022 |
engagements |
New leases |
remeasurements* |
disposal |
charge |
flows |
flows |
2023 |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Subscribed |
|||||||||
| capital |
20.4 |
14.8 |
- |
- |
- |
2.9 |
(2.9) |
- |
35.2 |
Lease liabilities |
4.8 |
0.1 |
4.4 |
(0.3) |
(0.4) |
0.2 |
(0.2) |
(0.9) |
7.7 |
* 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 and subscribed capital) 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 value
156
155
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.
Loans to Directors and close family members
Group and Society |
||
2024 |
2023 |
|
£000 |
£000 |
|
At 31 December |
43 |
241 |
These loans were 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.
Deposits and investments held by Directors and their close family members
Group and Society |
||
2024 |
2023 |
|
£000 |
£000 |
|
At 31 December |
559 |
481 |
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 2024 or 2023.
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.
During the year, the following transactions were carried out with related parties:
(a) Sales of
financial and administrative services
Group and Society |
||
2024 |
2023 |
|
£000 |
£000 |
|
Newcastle Strategic Solutions Limited |
11,774 |
11,244 |
Sales of services are negotiated with related parties on commercial terms.
(b) Purchases of services
Business Support Services |
Group and Society |
|
2024 |
2023 |
|
£000 |
£000 |
|
Newcastle Strategic Solutions Limited |
17,758 |
16,782 |
Purchased services are negotiated with related parties on commercial terms.
At 31 December 2024 the following unsecured trading balances remained outstanding with related parties:
(c) Outstanding balances
Amounts owed to Society |
Amounts owed by Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£000 |
£000 |
£000 |
£000 |
|
Newcastle Strategic Solutions Limited |
7,097 |
2,731 |
4,287 |
1,846 |
Newcastle Financial Advisers Limited |
- |
- |
1,530 |
1,450 |
Newcastle Mortgage Loans (Jersey) Limited |
12 |
- |
- |
- |
MBS (Mortgages) Limited |
46 |
- |
1,461 |
112 |
At 31 December 2024 the following borrowings and cash deposits remained outstanding with related parties:
(d) Borrowings
/ cash deposits
Amounts borrowed from Society |
Amounts deposited with Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£000 |
£000 |
£000 |
£000 |
|
Newcastle Strategic Solutions Limited |
33,940 |
32,813 |
- |
- |
Newcastle Mortgage Loans (Jersey) Limited |
122 |
367 |
- |
- |
Tyne Funding No.1 plc |
2,544 |
2,544 |
- |
- |
Interest paid to Society |
Interest paid by Society |
|||
2024 |
2023 |
2024 |
2023 |
|
£000 |
£000 |
£000 |
£000 |
|
Newcastle Strategic Solutions Limited |
2,292 |
1,743 |
- |
- |
Newcastle Mortgage Loans (Jersey) Limited |
46 |
45 |
- |
- |
Tyne Funding No.1 plc |
13 |
13 |
- |
- |
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 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 loan to Tyne Funding No.1 Plc has an interest rate of 0.5%. The loan is subordinate to all other obligations of
Disclosures relating to financial instruments and related risks in notes 33 to 44 are given on a Group basis, as the
risks of the organisation are managed on a Group basis. The Society basis is not considered to be materially
different from the Group basis for any of these disclosures.
Note 1 describes how the classes of
financial instruments are measured, and how income and expenses,
including fair value gains and losses, are recognised. The following measurement basis acronyms are used
throughout this disclosure:
FVOCI |
fair value through other comprehensive income |
FVTPL |
fair value through pro fit or loss |
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 financial assets or liabilities which are offset with the net amount presented on the Balance Sheet, with the
exception of the deemed loan with Tyne Funding No. 1 Plc as detailed in note 14.
The Group has not reclassified any financial assets during the year.
The Group does not have material exposure to equity risk or currency risk.
158
157
33. Categories of financial instruments
The following table analyses the
financial assets and liabilities in the balance sheet by the class o
f
financial
instrument to which they are assigned and by the measurement basis.
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 | 37 | - | - | 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 | 22 | 241.0 | - | - | 241.0 |
Amounts owed to credit insitutions | 23 | 417.6 | - | - | 417.6 |
Derivative financial instruments | 37 | - | - | 29.4 | 29.4 |
Subordinated liabilities | 26 | 20.2 | - | - | 20.2 |
Subscribed capital | 27 | 34.8 | - | - | 34.8 |
Other liabilities, of which financial | 24 | 9.0 | - | - | 9.0 |
Total financial liabilities | 6,155.3 | - | 29.4 | 6,184.7 |
Group at 31 December 2023 | Amortised | ||||
cost | FVOCI | FVTPL | Total | ||
Note | £m | £m | £m | £m | |
Financial assets | |||||
Cash in hand and balances with the Bank of England | 525.5 | - | - | 525.5 | |
Loans and advances to credit institutions* | 10 | 109.8 | - | - | 109.8 |
Debt securities | 11 | - | 615.0 | - | 615.0 |
Derivative financial instruments | 37 | - | - | 50.9 | 50.9 |
Loans and advances to customers | 12 | 4,671.3 | - | 188.4 | 4,859.7 |
Investments | 15 | - | - | 1.9 | 1.9 |
Other assets, of which financial | 20 | 6.0 | - | - | 6.0 |
Total financial assets | 5,312.6 | 615.0 | 241.2 | 6,168.8 |
Financial liabilities | |||||
Due to Members | 21 | 5,014.3 | - | - | 5,014.3 |
Due to other customers | 22 | 262.3 | - | - | 262.3 |
Deposits from credit institutions | 23 | 538.7 | - | - | 538.7 |
Derivative financial instruments | 37 | - | - | 61.7 | 61.7 |
Subscribed capital | 27 | 34.8 | - | - | 34.8 |
Other liabilities, of which financial | 24 | 10.9 | - | - | 10.9 |
Total financial liabilities | 5,861.0 | - | 61.7 | 5,922.7 |
*Loans and advances to credit institutions includes £16.7m (2023: £14.0m) in cash held by the Society’s subsidiary entities.
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.
Cash in hand and balances with the Bank of England
Cash held for liquidity and operational purposes.
Loans and advances to credit institutions
Cash lent to financial institutions to generate an interest income return, operational bank accounts and cash
collateral placed with derivative counterparties to be repaid to the Group in future periods.
Debt securities
Assets comprising covered bonds, residential mortgage-backed securities, government gilts and supranational
bonds. Investments made to utilise liquid cash reserves to generate interest income.
Derivative financial instruments
Financial instruments whose value is derived from an underlying asset, index or reference rate it is linked to. The
Group does not operate a derivative financial instruments trading book. Derivatives are held
for hedging purposes.
Loans and advances to customers
Cash lent to individual customers of the Group, corporates and housing associations.
Investments
Investments in equity instruments of subsidiaries and other companies.
Due to Members
Cash deposits made by Members of the Society.
Due to other customers
Cash deposits made by non-Members of the Group.
Deposits from credit institutions
Deposits made by financial institutions with the Group.
Subordinated liabilities
Subordinated loan notes issued by the Group, with further details given in note 26.
Subscribed capital
Permanent Interest Bearing Shares issued by the Group, with further details given in note 27.
160
159
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:
2024 |
2023 |
||
Financial assets |
Level |
£m |
£m |
Debt securities at FVOCI |
1 |
602.3 |
615.0 |
Equity investments |
1 |
0.1 |
0.1 |
Derivative financial instruments |
2 |
56.6 |
50.9 |
Equity investments |
3 |
1.5 |
1.8 |
Loans and advances to customers held at fair value |
3 |
171.6 |
188.4 |
Financial liabilities |
|||
Derivative financial instruments |
2 |
29.4 |
61.7 |
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 pro
fit or loss
The Group’s equity release mortgage assets are accounted for as fair value through pro
fit 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 re
ference 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 speci
fic
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 the mortality and prepayment rates, the
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 2024 the fair value of the equity release mortgage assets was £171.6m (2023: £188.4m). The
sensitivity of this value to the estimates shown above is as follows:
Mortgage assets held at fair value
31 December 2024 |
31 December 2023 |
||
(Decrease) / |
(Decrease) / |
||
Assumption |
Change in |
increase in fair |
increase in fair |
assumption |
value |
value |
|
£m |
£m |
||
Discount rate |
+/- 1% |
(9.6) / 10.8 |
(11.2) / 12.5 |
Long term property price growth |
+/- 2% |
4.0 / (4.8) |
4.6 / (5.7) |
Sales discount on collateral |
+/- 2.5% |
(1.5) / 1.5 |
(1.7) / 1.6 |
Property price volatility |
+/- 3% |
(2.9) / 2.9 |
(3.5) / 2.9 |
The following table provides a reconciliation of the equity release portfolio’s opening and closing fair value.
2024 |
2023 |
|
£m |
£m |
|
At 1 January |
188.4 |
166.3 |
Acquired on transfer of engagements |
- |
26.5 |
Interest accrued |
12.2 |
11.2 |
Redemptions |
(21.8) |
(19.3) |
Changes in property price assumptions – recorded in profit and loss |
- |
(3.0) |
Changes in discount rate– recorded in profit and loss |
(6.0) |
6.4 |
Changes in exchange rates – recorded in profit and loss |
(1.2) |
0.3 |
At 31 December |
171.6 |
188.4 |
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 £5.8m, with the remaining movements being due to movements in loan balances. The value of interest rate
swaps increased by £10.7m, resulting in a net gain of £4.9m in the year included in the Income Statement. See note
39 for details.
Equity Investments
The fair value of the Group’s investment in Openwork units is calculated using a model which discounts the future
expected cash flows
from the investment. These cash
flows relate primarily to the dividend’s receivable by the
Group. These dividends are then discounted to their present value, using a discount rate that estimates the
underlying risks associated with an unlisted equity instrument. The valuation uses a number of inputs which require
estimation, such as future dividend payout ratios, discount rates, long term dividend growth and the underlying
businesses performance.
At 31 December 2024 the fair value of the level 3 investments held at fair value was £1.5m (2023: £1.8m). The
sensitivity of this value to the key estimates used is as follows:
31 December 2024 |
31 December 2023 |
||
(Decrease) / |
(Decrease) / |
||
Assumption |
Change in |
Increase in fair |
Increase in fair |
assumption |
value |
value |
|
£m |
£m |
||
Discount rate |
+/- 1% |
(0.1) / 0.2 |
(0.2) / 0.2 |
Long term dividend growth rate |
+/- 2% |
0.2 / (0.2) |
0.4 / (0.2) |
The following table provides a reconciliation of the level 3 equity investments opening and closing fair value:
2024 |
2023 |
|
£m |
£m |
|
At 1 January |
1.8 |
2.0 |
Changes in fair value recorded in pro fit or loss |
(0.3) |
(0.2) |
At 31 December |
1.5 |
1.8 |
35. 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 o
f contractual amounts due and not through
disposal. This is deemed to also reflect their best use. I
f the Group's intended use of an asset or liability changes,
the accounting adopted for the item is revisited for reclassi
fication. The carrying values below reflect the Group's
maximum exposure to counterparty credit risk at 31 December 2024.
GROUP |
Carrying value |
Fair value |
||||
2024 |
2023 |
2024 |
2023 |
|||
Financial assets |
Note |
Level* |
£m |
£m |
£m |
£m |
Cash and balances with the Bank of England |
1 |
451.5 |
525.5 |
451.5 |
525.5 |
|
Loans and advances to credit institutions |
10 |
1 |
101.8 |
109.8 |
101.8 |
109.8 |
Loans and advances to customers |
12 |
3 |
5,117.7 |
4,671.3 |
5,095.3 |
4,498.6 |
Other assets, of which financial |
20 |
3 |
5.2 |
6.0 |
5.2 |
6.0 |
Financial liabilities |
||||||
Due to Members |
22 |
3 |
5,432.7 |
5,014.3 |
5,435.4 |
4,983.4 |
Due to other customers |
23 |
3 |
241.0 |
262.3 |
241.0 |
262.0 |
Deposits from credit institutions |
24 |
3 |
417.6 |
538.7 |
417.9 |
538.7 |
Subordinated liabilities |
26 |
1 |
20.2 |
- |
20.9 |
- |
Subscribed capital |
27 |
1 |
34.8 |
34.8 |
48.2 |
45.0 |
Other liabilities, of which financial |
25 |
3 |
9.0 |
10.9 |
9.0 |
10.8 |
*Levels are defined in note 33.
The Group does not trade in financial instruments. Against level 3 assets there is no expectation that a de
ferred
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 is 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.
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 and net interest income,
including the Groups hedging positions. The most severe Economic Value Impact (EVE) shock is the parallel shock
up, with a reduction in market value of £17.0m. A parallel shock estimates the impact on earnings and the
discounted present value of future cash
flows (EVE) via increasing the yield curve a fixed amount across all
future
points. The majority of this is driven by the structural hedging of the Group's general reserves (which is excluded
from the EVE results below). The Group maintains this structural hedge 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. Conversely, the biggest reduction in net interest
income comes from a parallel shock down. This is driven by basis risk positions and timing differences in rate
pass-on to administered rates vs external market indices.
2024
2023
+2.5%
-2.5%
+2.5%
-2.5%
£m
£m
£m
£m
Economic value impact At 31 December
(17.0)
15.2
(6.2)
4.8
The increase in the economic value shock from 2023 has arisen due to a greater focus on hedging short term
fixed
rate savings. Whilst this increases the EVE shock results, it offers greater protection against falling rates and ensures
the Society has a better balance between the two key metrics of EVE and NII shocks. The EVE result at year end was
still significantly below the outlier test trigger set by the regulator.
Please see notes 37-39 for details about instruments used for managing interest rate risk.
161
162
164
163
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 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) |
Group as at 31 December 2023
Master |
||||
netting |
Financial |
|||
Gross amount |
arrangements |
collateral |
Net amount |
|
£m |
£m |
£m |
£m |
|
Financial assets |
||||
Derivative assets |
50.9 |
(40.6) |
- |
10.3 |
Financial liabilities |
||||
Derivative liabilities |
(61.7) |
40.6 |
19.0 |
(2.1) |
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) |
Society as at 31 December 2023
Master |
||||
netting |
Financial |
|||
Gross amount |
arrangements |
collateral |
Net amount |
|
£m |
£m |
£m |
£m |
|
Financial assets |
||||
Derivative assets |
40.6 |
(40.6) |
- |
- |
Financial liabilities |
||||
Derivative liabilities |
(61.7) |
40.6 |
19.0 |
(2.1) |
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 o
f 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 o
ffsetting 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 £68.9m (2023: £63.3m) 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 38.
The Group has a one way collateralisation swap agreement as part of the securitisation program, the exposure
under this agreement is £8.7m (2023: £10.3m). The remaining over-collateralisation of £0.9m (2023: £5.1m) 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
166
165
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 37. 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 un-encumbered
financial assets.
2024 |
2023 |
|||
Group |
||||
Encumbered |
Unencumbered |
Encumbered |
Unencumbered |
|
£m |
£m |
£m |
£m |
|
Cash and balances with the Bank of England |
- |
451.5 |
14.5 |
511.0 |
Loans and advances to credit institutions |
80.9 |
20.9 |
87.3 |
22.5 |
Debt securities* |
- |
602.3 |
- |
615.0 |
Loans and advances to customers* |
773.3 |
4,516.0 |
945.1 |
3,914.6 |
Derivative financial instruments |
- |
56.6 |
- |
50.9 |
Other assets |
- |
54.7 |
- |
62.3 |
Total |
854.2 |
5,702.0 |
1,046.9 |
5,176.3 |
*£182.6m of encumbered loans and advances to customers relate to mortgage assets used as a security in the Group’s
securitisation programme. Loan notes secured on these mortgage assets totalling £190.2m (2023: £227.5m) have been retained by
the Group, as outlined in note 14. These notes are not presented on the Group Balance sheet and are unencumbered; £157.5m of
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 competitive 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, and borrowers pay to the Society an interest income in return for the funds they
have borrowed.
Mortgage contracts attracting a fixed rate o
f 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 o
f 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 o
f the
fixed rate
exposures that the interest rate swaps are used to hedge are held at amortised cost, 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 re
flected 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 speci
fic mortgage contract or a specific group o
f 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 de
fined portion o
f a mortgage or savings book, but this
portion is re-designated on a regular basis to reflect changes in the hedged port
folio, 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.
168
167
Maturity analysis of hedging instruments
The maturity profile o
f the Group’s hedging instruments at 31 December 2024 is as follows:
Between | |||||
Up to 3 | 3 and 12 | Between 1 | |||
months | months | and 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 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 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 utilised in securitisations | |||||
Nominal asset 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 | - | - | 1.18 |
Fair value of assets | 0.3 | 0.1 | - | - | 0.4 |
Fair value of liabilities | - | - | - | - | - |
The maturity profile o
f the Group’s hedging instruments at 31 December 2023 is as follows:
| Between | |||||
Up to 3 | 3 and 12 | Between 1 | |||
months | months | and 5 years | Over 5 years | Total | |
Interest rate swaps designated in macro fair value hedge relationships | |||||
Nominal amount | - | 57.0 | 1,171.0 | 10.0 | 1,238.0 |
Average fixed interest rate | - | 2.51% | 2.77% | 4.57% | 2.77% |
Fair value of assets | - | 1.3 | 37.3 | - | 38.6 |
Fair value of liabilities | - | - | (10.6) | (0.8) | (11.4) |
Interest rate swaps designated in micro fair value hedge relationships | |||||
Nominal amount | 11.5 | 18.5 | 52.7 | 110.2 | 192.9 |
Average fixed interest rate | 4.47% | 4.80% | 2.66% | 4.38% | 3.96% |
Fair value of assets | - | - | 1.5 | - | 1.5 |
Fair value of liabilities | - | - | (0.3) | (12.7) | (13.0) |
Interest rate swaps designated in cashflow hedge relationships | |||||
Nominal amount | - | - | 57.5 | 55.0 | 112.5 |
Average fixed interest rate | - | - | 4.08% | 4.13% | 4.10% |
Fair value of assets | - | - | - | - | - |
Fair value of liabilities | - | - | (1.0) | (2.0) | (3.0) |
Interest rate swaps utilised in securitisations | |||||
Nominal asset amount | - | - | - | 203.4 | 203.4 |
Average fixed interest rate | - | - | - | 1.49% | 1.49% |
Nominal liability amount | - | - | - | 203.4 | 203.4 |
Average fixed interest rate | - | - | - | 1.54% | 1.54% |
Fair value of assets | - | - | - | 10.3 | 10.3 |
Fair value of liabilities | - | - | - | (10.4) | (10.4) |
Interest rate swaps in economic hedge relationships but not designated in accounting hedge relationships | |||||
Nominal amount | 35.0 | 50.0 | - | 148.8 | 233.8 |
Average fixed interest rate | 3.95% | 5.25% | - | 5.03% | 4.92% |
Fair value of assets | 0.2 | 0.2 | - | - | 0.4 |
Fair value of liabilities | (0.1) | - | - | (21.5) | (21.6) |
Total interest rate swaps | |||||
Nominal amount | 46.5 | 125.5 | 1,281.2 | 730.8 | 2,184.0 |
Average fixed interest rate | 1.68% | 1.46% | 1.90% | 3.92% | 3.45% |
Fair value of assets | 0.2 | 1.5 | 38.8 | 10.3 | 50.8 |
Fair value of liabilities | (0.1) | - | (11.9) | (47.4) | (59.4) |
Foreign exchange forwards in economic hedge relationships but not designated in accounting hedge relationships | |||||
Nominal amount | 17.5 | 24.7 | - | - | 42.2 |
Average GBP / EUR exchange rate | 1.15 | 1.15 | - | - | 1.15 |
Fair value of assets | - | - | - | - | - |
Fair value of liabilities | (0.1) | (0.2) | - | - | (0.3) |
Deferred consideration derivative | |||||
Nominal amount | - | 8.2 | 18.7 | 38.6 | 65.5 |
Fair value of assets | - | - | - | - | - |
Fair value of liabilities | - | (0.2) | (0.5) | (1.1) | (1.8) |
Swap assets and liabilities are held at their fair value on Balance Sheet as derivative
financial instruments.
170
169
Summary of hedged items in designated hedge relationships
2024 |
2023 |
|||||||
Fair value hedges |
||||||||
Carrying amount of hedged |
Change in |
Carrying amount of hedged |
Change in |
|||||
Interest rate risk |
items |
Accumulated |
fair value |
items |
Accumulated |
fair value |
||
amount of |
of hedged |
amount of |
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 |
2,289.6 |
- |
(21.9) |
(11.5) |
1,239.2 |
- |
(13.2) |
45.3 |
Fixed rate |
||||||||
customer deposits |
- |
716.3 |
- |
- |
- |
- |
- |
0.2 |
Fixed rate |
||||||||
customer loans |
||||||||
individually hedged |
118.0 |
- |
2.2 |
(7.1) |
96.4 |
- |
9.3 |
(3.5) |
Fixed rate FVOCI |
239.3 |
- |
(1.6) |
(3.7) |
87.2 |
- |
2.1 |
4.4 |
debt instruments
Cash flow hedges |
2024 |
2023 |
||||
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 |
ineffectiveness |
|||||
measurement |
Continuing hedges |
Discontined hedges |
measurement |
Continuing hedges |
Discontined hedges |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Gross floating rate |
||||||
liabilities* |
(7.1) |
2.3 |
4.6 |
5.8 |
(3.1) |
4.9 |
Cash flow hedges |
2024 |
2023 |
||||||
Effective |
Reclassified to Income |
Effective |
||||||
Interest rate risk |
Hedge |
portion |
Statement |
Hedge |
portion |
Reclassified to Income |
||
ineffectivness |
recognised |
ineffectivness |
recognised |
Statement |
||||
recognised |
in other |
Non- |
recognised |
in other |
Non- |
|||
in Income |
comprehensive |
Net 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* |
- |
7.1 |
- |
2.1 |
- |
5.8 |
- 0.4 |
|
* Highly probable future cash
flows arising
from loans and advances to customers
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 o
f 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 o
f 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.
2024 |
2023 |
|
£m |
£m |
|
Gains / (losses) on micro hedging instruments |
||
Interest rate swaps |
10.6 |
(1.1) |
(Losses) / gains on micro hedged item |
||
Mortgage assets (loans and advances to customers) |
(10.8) |
0.9 |
Gains / (losses) on cashflow instruments |
||
Interest rate swaps |
7.1 |
5.8 |
(Losses) / gains on cashflow hedge items |
||
Floating rate liabilities |
(5.0) |
(5.4) |
Gains / (losses) on macro hedging instruments |
||
Interest rate swaps |
6.7 |
(43.2) |
(Losses) / gains on macro hedged items |
||
Mortgage assets (loans and advances to customers) |
(11.5) |
45.5 |
Total ineffectiveness recognised in the Income Statement |
(2.9) |
2.5 |
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 |
|||
2024 |
2023 |
2024 |
2023 |
|
£m |
£m |
£m |
£m |
|
Fair value movement on loans and advances to customers held at FVTPL |
(5.8) |
4.4 |
(5.8) |
4.4 |
Fair value movement on derivative financial instruments in economic |
||||
relationship with loans and advances to customers held at FVTPL but not |
10.7 |
(3.7) |
10.7 |
(3.7) |
in accounting hedge relationships |
||||
Fair value movement on derivative financial instruments in other |
||||
| economic but not in accounting hedge relationships |
3.3 |
(2.9) |
3.3 |
(2.9) |
Interest expense on derivatives in economic but not in accounting hedge |
||||
| relationships |
- |
(0.5) |
- |
(0.5) |
Hedge ineffectiveness on accounting hedges |
(2.9) |
2.5 |
(2.9) |
2.5 |
Revaluation of investments |
(0.4) |
(0.2) |
- |
- |
4.9 |
(0.4) |
5.3 |
(0.2) |
|
Cash flow hedging reserve
Total |
|
£m |
|
Balance at 1 January 2024 |
1.4 |
Reclassification o f hedging losses to Income Statement |
(2.1) |
Revaluation of interest rate cash flow hedges in Other Comprehensive Income |
7.1 |
Deferred tax on cash flow hedges |
(1.3) |
Balance at 31 December 2024 |
5.1 |
172
171
Credit risk is the risk that a customer or counterparty is unable to honour their repayment of obligations as they
fall due.
The Group Risk Committee maintain oversight of the Credit Risk Committee. The Credit Risk Committee is
responsible for the monitoring of 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. Throughout 2024 the Model
Risk Committee met regularly, coinciding with key dates in the Group’s reporting calendar.
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.
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.
Provisioning methodology
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. Assets with no significant increase in credit risk since origination are denoted as stage
1 assets, assets which have suffered a significant increase in credit risk but have not de
faulted are denoted as stage
2 assets and assets that have defaulted are denoted as stage 3 assets.
When assessing movement in credit risk, it is the change in the risk of default occurring that is key, not the change
in the amount of any expected credit loss.
Assets are assessed on an individual basis with a forward-looking assessment undertaken to support the
recognition of future potential losses. While losses are provided for, assets are only formally written off when the
Group no longer holds any expectation of subsequent receipt, typically at the conclusion of a negotiation or sale.
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.
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.
POCI loan books are recognised at their fair value on acquisition, with changes in credit risk re
flected through a loss
allowance going forward. These mortgages are treated as stage 3 borrowers and do not get transferred to stage 1
or 2 if credit risk reduces.
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 high risk
customers but will lend to prime 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 o
f borrower risk – a risk score.
On a quarterly basis, the Group receives borrower credit scores from Experian, an industry leader in the
provisioning of consolidated credit scoring information. 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 de
faulted; or
Have fallen into >1 month’s arrears.
Stage 3 borrowers:
Have defaulted (assessed a range of internal qualitative and quantitative criteria); or
Have fallen into >3 month’s arrears.
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 vs. 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.
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 identi
fied include granting o
f forbearance, evidence of mortgage fraud, borrowers falling
into > 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 o
f 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.
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.
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173
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 2025 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; and
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 2024 were as follows:
Scenario weighings | Upside | Base | Downside | Stress |
2024 | 10% | 40% | 40% | 10% |
2023 | 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 in
formation have been re
flected 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 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 | |
31 December 2023 | |||||||
Scenario | Economic measure | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 |
| Upside | Unemployment rate, % | 4.7 | 4.4 | 4.3 | 3.6 | 3.6 | 3.6 |
| House price growth, % pa | 1.0 | 3.0 | 5.4 | 7.9 | 7.9 | 7.9 | |
| Base | Unemployment rate, % | 4.8 | 5.5 | 5.0 | 5.0 | 4.8 | 4.8 |
| House price growth, % pa | (1.2) | (3.4) | 0.7 | 3.9 | 6.4 | 6.4 | |
| Downside | Unemployment rate, % | 4.9 | 6.2 | 5.5 | 5.4 | 5.4 | 5.4 |
| House price growth, % pa | (5.8) | (9.7) | (4.4) | 1.0 | 3.9 | 3.9 | |
| Severe downside | Unemployment rate, % | 5.2 | 8.5 | 8.0 | 7.4 | 6.8 | 6.8 |
| House price growth, % pa | (8.0) | (13.3) | (15.1) | (1.7) | 0.7 | 0.7 | |
| Weighted* | Unemployment rate, % | 4.9 | 6.0 | 5.4 | 5.3 | 5.1 | 5.1 |
| House price growth, % pa | (3.5) | (6.3) | (2.5) | 2.6 | 5.0 | 5.0 | |
*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.
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175
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.
Fire safety and cladding risk
The Group has a small number of loans secured on properties with unsuitable cladding or other
fire sa
fety risks. A
review of high-risk properties has been performed and as the marketability of such properties is uncertain, a post
model adjustment of £0.3m (2023: £0.3m) has been recognised.
Affordability
Whilst the Group has seen small increases in non-performing loans in the current year, overall arrears remains low.
However, the significant increases in market interest rates over the previous two years result in significantly
increased mortgage costs for borrowers on variable rate products, as well as for those whose
fixed rate products
mature. A post model adjustment of £0.6m (2023: £0.9m) has been booked to account for the risk that some
borrowers whose borrowing costs have recently increased significantly or will do so in the
following three years
may struggle to afford their increased mortgage payments, based on information available to the Group.
The adjustment has been determined by classifying borrowers most at risk from increased mortgage interest rates
as stage 2.
Climate change
There have been no observed climate change related defaults and therefore no identi
fiable increases in credit risk.
A post model adjustment of £0.1m (2023: £nil) 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.
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.
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 de
faulted; or
Have fallen into >1 month’s arrears.
Stage 3 borrowers:
Have defaulted (assessed a range of internal qualitative and quantitative criteria); or
Have fallen into >3 month’s arrears.
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 signi
ficant 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 o
f 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 speci
fic 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 to commercial and other 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 o
f default and the sector or property
specific discount to indexed valuations at the time o
f disposal.
Future commercial 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 buy-to-let and commercial properties, the following reductions to valuations at 31
December 2024 were applied:
Sector | Upside | Base | Downside | Stress |
Retail | 10% | 20% | 30% | 60% |
Leisure | 40% | 50% | 55% | 65% |
Residential | 1% | 1% | 14-17% | 27-29% |
A separate model has been designed to accommodate the specific circumstances o
f the Serviced Apartments
portfolio, where property values are exposed to the pro
fitability o
f the London hotel market. For this portfolio, the
following (increases) / reduction to 2024 property values have been assumed:
Sector | Upside | Base | Downside | Stress |
Serviced apartments | (6%) | 15% | 30% | 60% |
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177
Housing associations
Loans to housing associations are monitored and managed by the commercial lending department with a range of
management information used to assess the Group’s ongoing exposure (which while of extremely high credit
quality remains of signi
ficant size). An open dialogue is maintained with borrowers, with the Group appraised o
f
their status, financial results and position, and numerous other financial and risk metrics. Quarterly management
information is also reviewed including business plans. Lending is contingent on compliance with a number of
financial commitments and covenants. The Group actively monitors
for potential breaches of contractual positions.
Whilst the Group has never experienced any arrears or suffered losses, due to the scale and nature of long-term
exposures, borrowers’ credit risk is measured through a bespoke risk grade scorecard which charts financial
performance, covenant compliance, asset cover, stock location/demand and regulatory feedback.
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 o
f 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.
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 process and regular regulatory stress testing and supervisory monitoring.
Other financial 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.
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 signi
ficant
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 bene
fitting
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
During the year inflation has reduced and remains below current average earnings growth. Bank base rate has also
reduced and overall, the cost of borrowing has reduced, which has eased affordability pressures and supported a
recovery in the housing market, with house prices increasing by 4%.
Although residential mortgage arrears have increased to some extent, in line with the overall market, borrowers
have remained very resilient to affordability pressures. Whilst there has been a small decrease in the proportion of
borrowers in stage 1, the improvement in the economic outlook over the year has resulted in overall provisions for
expected credit losses decreasing over the reporting period and a reduction in mortgage loss provision coverage
ratio across all mortgage loans decreasing from 0.13% to 0.11%.
Prime residential and buy-to-let lending
In 2024, provisions of £1.4m were booked on residential and buy-to-let mortgages newly originated in the year,
reflecting the growth o
f the mortgage book. Redemptions in the year resulted in a £0.8 m reduction of provisions,
with £1.2m of provisions released on residential and buy-to-let mortgages as the macro-economic outlook improved
during the year, resulting in a net gain of £0.6m.
This results in a decrease in the mortgage loss provision coverage ratios from 0.13% to 0.11%.
Legacy books
The Group successfully continued winding down its legacy portfolios, seeing the redemption of, or capital
repayments against, legacy loans, reducing the balances by £15.0m and an overall reduction in provisions of £0.4m.
Mortgage loans transferred to the legacy books from prime residential and buy-to-let lending results in a £0.6m
increase in provisions in relation to this portfolio of loans (with a corresponding reduction in prime residential and
buy-to-let provisions), with redemptions in the year resulting in a £0.5m reduction in provisions and a net decrease
in credit risk across legacy lending decreasing provisions by a further £0.5m.
A number of loans acquired as part of the merger with Manchester Building Society in 2023 were classed as
Purchased or Originated Credit Impaired on merger, resulting in the loans being recognised on the Balance Sheet
at the net amount of gross mortgage balance less provision. Following redemptions of £2.6m of these loans,
provisions of £1.5m which were netted off the gross mortgage balances have also been reversed, leading to a £1.5m
gain to the Income Statement.
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179
Quantitative impairment impact
Loss allowance | Increases due to | Decreases | Loss allowance | |||
Reconciliation table | at 1 January | orgination and | due to | Transition | Changes in | at 31 December |
2024 | acquisition | derecognition | between stages | credit risk | 2024 | |
£000 | £000 | £000 | £000 | £000 | £000 | |
Prime residential | ||||||
Stage 1 | 705.6 | 273.5 | (267.5) | 1,160.2 | (1,152.2) | 719.6 |
Stage 2 | 3,224.3 | 890.4 | (239.9) | (1,203.1) | (358.2) | 2,313.5 |
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) | 0.0 | (1,153.9) | 4,784.1 |
Buy-to-let | ||||||
Stage 1 | 114.8 | 45.4 | (36.9) | 41.2 | (39.3) | 125.2 |
Stage 2 | 301.4 | 31.9 | (7.2) | (38.9) | (164.0) | 123.2 |
Stage 3 | 225.7 | - | (197.4) | (2.3) | 115.0 | 141.0 |
Total | 641.9 | 77.3 | (241.5) | 0.0 | (88.3) | 389.4 |
Legacy buy-to-let | ||||||
Stage 1 | 52.6 | - | (49.7) | - | (0.5) | 2.4 |
Stage 2 | - | - | - | - | - | - |
Stage 3 | - | - | - | - | - | - |
Total | 52.6 | - | (49.7) | - | (0.5) | 2.4 |
Purchased credit impaired lending | ||||||
Stage 1 | - | - | - | - | - | - |
Stage 2 | - | - | - | - | - | - |
Stage 3 | 244.7 | - | (26.8) | - | (217.9) | - |
Total | 244.7 | - | (26.8) | - | (217.9) | - |
Commercial | ||||||
Stage 1 | 28.8 | - | (28.8) | 1.1 | - | 1.1 |
Stage 2 | 492.7 | - | (292.1) | (1.1) | (199.6) | (0.1) |
Stage 3 | - | 575.4 | - | - | - | 575.4 |
Total | 521.5 | 575.4 | (320.9) | (0.0) | (199.6) | 576.4 |
Housing association | ||||||
Stage 1 | - | - | - | - | - | - |
Stage 2 | - | - | - | - | - | - |
Stage 3 | - | - | - | - | - | - |
Total | - | - | - | - | - | - |
Serviced apartments | ||||||
Stage 1 | 14.1 | - | (2.1) | 85.2 | (80.7) | 16.5 |
Stage 2 | 622.2 | - | (0.7) | (85.2) | (87.0) | 449.3 |
Stage 3 | 343.6 | - | (1.5) | - | 86.3 | 428.4 |
Total | 979.9 | - | (4.3) | - | (81.4) | 894.2 |
Policy loans | ||||||
Stage 1 | - | - | - | - | - | - |
Stage 2 | - | - | - | - | - | - |
Stage 3 | - | - | - | - | - | |
Total | - | - | - | - | - | - |
| Total | ||||||
Stage 1 | 915.9 | 318.9 | (385.0) | 1,287.7 | (1,272.7) | 864.8 |
Stage 2 | 4,640.6 | 922.3 | (539.9) | (1,328.3) | (808.8) | 2,885.9 |
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 |
Provisions of £0.2m (2023: £0.2m) above relate to loans and advances to customers made by a subsidiary company, secured on
prime residential property.
Quantitative impairment impact
Gross exposure | Increases due to | Decreases | Gross exposure | ||
Reconciliation table | at 1 January | orgination and | due to | Transition | at 31 December |
2024 | acquisition | derecognition | between stages | 2024 | |
£m | £m | £m | £m | £m | |
Prime residential | |||||
Stage 1 | 3,248.4 | 922.1 | (537.9) | (58.6) | 3,574.0 |
Stage 2 | 720.8 | 171.2 | (47.4) | 36.9 | 881.5 |
Stage 3 | 50.6 | 2.9 | (7.2) | 21.7 | 68.0 |
Total | 4,019.8 | 1,096.2 | (592.5) | - | 4,523.5 |
Buy-to-let | |||||
Stage 1 | 292.6 | 40.4 | (53.2) | (30.5) | 249.3 |
Stage 2 | 90.4 | 10.0 | (1.4) | 30.5 | 129.5 |
Stage 3 | 6.6 | - | (0.7) | - | 5.9 |
Total | 389.6 | 50.4 | (55.3) | - | 384.7 |
Legacy buy-to-let | |||||
Stage 1 | 13.3 | - | (7.5) | - | 5.8 |
Stage 2 | - | - | - | - | - |
Stage 3 | - | - | - | - | - |
Total | 13.3 | - | (7.5) | - | 5.8 |
Purchased credit impaired lending | |||||
Stage 1 | - | - | - | - | - |
Stage 2 | - | - | - | - | - |
Stage 3 | 7.7 | - | (2.4) | - | 5.3 |
Total | 7.7 | - | (2.4) | - | 5.3 |
Commercial | |||||
Stage 1 | 3.2 | - | (3.2) | 1.3 | 1.3 |
Stage 2 | 2.9 | - | (1.6) | (1.3) | - |
Stage 3 | - | 0.7 | - | - | 0.7 |
Total | 6.1 | 0.7 | (4.8) | - | 2.0 |
Housing association | |||||
Stage 1 | 211.9 | - | (32.7) | - | 179.2 |
Stage 2 | - | - | - | - | - |
Stage 3 | - | - | - | - | - |
Total | 211.9 | - | (32.7) | - | 179.2 |
Serviced apartments | |||||
Stage 1 | 9.7 | - | (0.8) | 0.3 | 9.2 |
Stage 2 | 4.0 | - | (0.3) | 3.7 | |
- | |||||
Stage 3 | 1.0 | - | - | 1.0 | |
- | |||||
Total | 14.7 | - | (0.8) | - | 13.9 |
Policy loans | |||||
Stage 1 | 1.2 | - | (0.2) | - | 1.0 |
Stage 2 | - | - | - | - | - |
Stage 3 | - | - | - | - | - |
Total | 1.2 | - | (0.2) | - | 1.0 |
Total | |||||
Stage 1 | 3,780.3 | 962.5 | (635.5) | (87.5) | 4,019.8 |
Stage 2 | 818.1 | 181.2 | (50.4) | 65.8 | 1,014.7 |
Stage 3 | 65.9 | 3.6 | (10.3) | 21.7 | 80.9 |
Total | 4,664.3 | 1,147.3 | (696.2) | - | 5,115.4 |
182
181
Quantitative impairment impact
Loss allowance | Increases due to | Decreases | Loss allowance | |||
Reconciliation table | at 1 January | orgination and | due to | Transition | Changes in | at 31 December |
2023 | acquisition | derecognition | between stages | credit risk | 2023 | |
£000 | £000 | £000 | £000 | £000 | £000 | |
Prime residential | ||||||
Stage 1 | 441.2 | 526.5 | (191.8) | 635.7 | (706.0) | 705.6 |
Stage 2 | 1,680.5 | 1,261.1 | (63.4) | (763.5) | 1,109.6 | 3,224.3 |
Stage 3 | 873.5 | 62.3 | (255.0) | 127.8 | 452.5 | 1,261.1 |
Total | 2,995.2 | 1,849.9 | (510.2) | - | 856.1 | 5,191.0 |
Buy-to-let | ||||||
Stage 1 | 131.6 | 50.2 | (20.6) | 12.2 | (58.6) | 114.8 |
Stage 2 | 223.8 | 1.8 | (5.9) | (47.0) | 128.7 | 301.4 |
Stage 3 | 94.4 | - | (94.2) | 34.8 | 190.7 | 225.7 |
Total | 449.8 | 52.0 | (120.7) | - | 260.8 | 641.9 |
Legacy buy-to-let | ||||||
Stage 1 | 39.6 | - | - | - | 13.0 | 52.6 |
Stage 2 | - | - | - | - | - | - |
Stage 3 | - | - | - | - | - | - |
Total | 39.6 | - | - | - | 13.0 | 52.6 |
Purchased credit impaired lending | ||||||
Stage 1 | - | - | - | - | - | - |
Stage 2 | - | - | - | - | - | - |
Stage 3 | - | - | - | - | 244.7 | 244.7 |
Total | - | - | - | - | 244.7 | 244.7 |
Commercial | ||||||
Stage 1 | 39.2 | 118.5 | (39.2) | (89.7) | - | 28.8 |
Stage 2 | 529.6 | - | (32.2) | 89.7 | (94.4) | 492.7 |
Stage 3 | 1,826.9 | - | (1,826.9) | - | - | - |
Total | 2,395.7 | 118.5 | (1,898.3) | - | (94.4) | 521.5 |
Housing association | ||||||
Stage 1 | - | - | - | - | - | - |
Stage 2 | - | - | - | - | - | - |
Stage 3 | - | - | - | - | - | - |
Total | - | - | - | - | - | - |
Serviced apartments | ||||||
Stage 1 | 11.8 | - | (1.2) | (0.6) | 4.1 | 14.1 |
Stage 2 | 439.4 | - | (38.9) | 63.8 | 157.9 | 622.2 |
Stage 3 | 303.3 | - | - | (63.2) | 103.5 | 343.6 |
Total | 754.5 | - | (40.1) | - | 265.5 | 979.9 |
Policy loans | ||||||
Stage 1 | - | - | - | - | - | - |
Stage 2 | - | - | - | - | - | - |
Stage 3 | - | - | - | - | - | - |
Total | - | - | - | - | - | - |
Total | ||||||
Stage 1 | 663.4 | 695.2 | (252.8) | 557.6 | (747.5) | 915.9 |
Stage 2 | 2,873.3 | 1,262.9 | (140.4) | (657.0) | 1,301.8 | 4,640.6 |
Stage 3 | 3,098.1 | 62.3 | (2,176.1) | 99.4 | 991.4 | 2,075.1 |
Total | 6,634.8 | 2,020.4 | (2,569.3) | - | 1,545.7 | 7,631.6 |
Quantitative impairment impact
Increases due to | |||||
Reconciliation table | Gross exposure at 1 | orgination and | Decreases due to | Transition between | Gross exposure at |
January 2023 | acquisition | derecognition | stages | 31 December 2023 | |
£m | £m | £m | £m | £m | |
Prime residential | |||||
Stage 1 | 2,810.3 | 934.4 | (418.2) | (78.1) | 3,248.4 |
Stage 2 | 531.6 | 176.5 | (39.7) | 52.4 | 720.8 |
Stage 3 | 27.2 | 2.0 | (4.3) | 25.7 | 50.6 |
Total | 3,369.1 | 1,112.9 | (462.2) | - | 4,019.8 |
Buy-to-let | |||||
Stage 1 | 328.3 | 22.1 | (23.9) | (33.9) | 292.6 |
Stage 2 | 65.2 | 1.8 | (5.0) | 28.4 | 90.4 |
Stage 3 | 2.4 | - | (1.3) | 5.5 | 6.6 |
Total | 395.9 | 23.9 | (30.2) | - | 389.6 |
Legacy buy-to-let | |||||
Stage 1 | 14.0 | 0.3 | (1.0) | - | 13.3 |
Stage 2 | - | - | - | - | - |
Stage 3 | - | - | - | - | - |
Total | 14.0 | 0.3 | (1.0) | - | 13.3 |
Purchased credit impaired lending | |||||
Stage 1 | - | - | - | - | - |
Stage 2 | - | - | - | - | - |
Stage 3 | - | 8.0 | (0.3) | - | 7.7 |
Total | - | 8.0 | (0.3) | - | 7.7 |
Commercial | |||||
Stage 1 | 3.1 | 3.6 | (3.1) | (0.4) | 3.2 |
Stage 2 | 2.7 | - | (0.2) | 0.4 | 2.9 |
Stage 3 | 4.8 | - | (4.8) | - | - |
Total | 10.6 | 3.6 | (8.1) | - | 6.1 |
Housing association | |||||
Stage 1 | 270.9 | 0.2 | (59.2) | - | 211.9 |
Stage 2 | - | - | - | - | - |
Stage 3 | - | - | - | - | - |
Total | 270.9 | 0.2 | (59.2) | - | 211.9 |
Serviced apartments | |||||
Stage 1 | 11.8 | - | (1.6) | (0.5) | 9.7 |
Stage 2 | 3.5 | - | (0.3) | 0.8 | 4.0 |
Stage 3 | 1.3 | - | - | (0.3) | 1.0 |
Total | 16.6 | - | (1.9) | - | 14.7 |
Policy loans | |||||
Stage 1 | 1.5 | - | (0.3) | - | 1.2 |
Stage 2 | - | - | - | - | - |
Stage 3 | - | - | - | - | - |
Total | 1.5 | - | (0.3) | - | 1.2 |
Total | |||||
Stage 1 | 3,439.9 | 960.6 | (507.3) | (112.9) | 3,780.3 |
Stage 2 | 603.0 | 178.3 | (45.2) | 82.0 | 818.1 |
Stage 3 | 35.7 | 10.0 | (10.7) | 30.9 | 65.9 |
Total | 4,078.6 | 1,148.9 | (563.2) | - | 4,664.3 |
184
183
The gross carrying values above reflect the Group’s maximum exposure to credit risk at 31 December 2024 and 31
December 2023 without taking into account any collateral held or provisions made against expected loss. The table
above has been updated to remove effective interest rate adjustments from the underlying mortgage assets.
The Group did not purchase or originate any financial assets that were considered to be credit impaired during
2024. Purchased credit impaired loans relate to legacy residential and commercial lending which was acquired
credit impaired as part of the transfer of engagements with Manchester Building Society. The lending is outside of
the Group’s current lending policy.
There has been no material movement in loss allowances held against other financial assets during 2024. Debt
securities held remain of very high credit quality at 31 December 2024 and the Group is not exposed to any
significant value or volume o
f overdue trade receivables.
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:
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 |
£m | £m | £m | £000 | £000 | £000 | % | % | % | |
0.0% - 1.0% | 48.7 | 0.6 | - | 1.0 | 0.2 | - | - | 0.03 | - |
1.0% - 2.0% | 1,686.1 | 69.2 | - | 124.3 | 65.9 | - | 0.01 | 0.10 | - |
2.0% - 3.0% | 1,563.5 | 75.0 | - | 225.8 | 75.2 | - | 0.01 | 0.10 | - |
3.0% - 4.0% | 139.4 | 2.9 | - | 15.1 | 1.1 | - | 0.01 | 0.04 | - |
4.0% - 5.0% | 422.1 | 24.6 | - | 155.8 | 33.4 | - | 0.04 | 0.14 | - |
5.0% - 6.0% | 3.4 | - | - | 0.1 | - | - | - | - | - |
6.0% - 7.0% | 3.2 | - | - | 0.1 | - | - | - | - | - |
7.0% - 8.0% | 5.6 | 0.3 | - | - | - | - | - | - | - |
8.0% - 9.0% | 4.4 | 6.0 | - | 0.2 | 2.2 | - | - | 0.04 | - |
9.0% - 10.0% | 13.0 | 22.1 | - | 1.7 | 12.4 | - | 0.01 | 0.06 | - |
10.0% - 100.0% | 140.4 | 560.1 | 58.3 | 127.8 | 2,467.2 | 1,188.0 | 0.09 | 0.44 | 2.04 |
Total* | 4,029.8 | 760.8 | 58.3 | 651.9 | 2,657.6 | 1,188.0 | 0.02 | 0.35 | 2.04 |
*The table above excludes gross mortgage balances of £59.3m, with a provision of £0.1m 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.
| 2023 | 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% | 22.0 | - | - | - | - | - | - | - | - |
1.0% - 2.0% | 971.5 | 25.9 | - | 64.8 | 53.0 | - | 0.01 | 0.20 | - |
2.0% - 3.0% | 1,422.6 | 48.6 | - | 197.8 | 154.3 | - | 0.01 | 0.32 | - |
3.0% - 4.0% | 626.1 | 24.7 | - | 184.6 | 83.9 | - | 0.03 | 0.34 | - |
4.0% - 5.0% | 396.1 | 21.8 | - | 179.3 | 82.4 | - | 0.05 | 0.38 | - |
5.0% - 6.0% | 87.6 | 5.1 | - | 19.1 | 12.9 | - | 0.02 | 0.25 | - |
6.0% - 7.0% | 1.8 | 0.1 | - | 0.1 | - | - | 0.01 | - | - |
7.0% - 8.0% | 1.3 | 0.1 | - | - | - | - | - | - | - |
8.0% - 9.0% | 2.2 | 2.4 | - | 0.1 | 0.7 | - | - | 0.03 | - |
9.0% - 10.0% | 1.3 | 3.3 | - | - | 0.4 | - | - | 0.01 | - |
10.0% - 100.0% | 106.9 | 527.5 | 40.4 | 141.6 | 3,262.2 | 678.9 | 0.13 | 0.62 | 1.68 |
Total* | 3,639.4 | 659.5 | 40.4 | 787.4 | 3,649.8 | 678.9 | 0.02 | 0.55 | 1.68 |
* The table above excludes gross mortgage balances of £70.1m, with a provision of £0.8m for which no lifetime probability of
default is available. This includes £66.4m 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.
186
185
Sensitivity of the credit loss provisions to key assumptions
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:
Commercial, |
|||
legacy buy-to- |
|||
2024 |
let and credit |
||
Residential and |
impaired |
Serviced |
|
buy-to-let |
lending |
apartments |
|
£m |
£m |
£m |
|
Actual |
5.0 |
0.5 |
0.8 |
Upside |
2.9 |
0.5 |
0.1 |
Base |
3.5 |
0.5 |
0.6 |
Downside |
5.8 |
0.6 |
1.0 |
Stress |
10.0 |
0.6 |
1.8 |
Commercial, |
|||
legacy buy-to- |
|||
2023 |
Residential and |
let and credit |
Serviced |
buy-to-let |
impaired |
apartments |
|
lending |
|||
£m |
£m |
£m |
|
Actual |
5.9 |
0.8 |
1.0 |
Upside |
2.9 |
0.5 |
0.1 |
Base |
3.9 |
0.7 |
0.6 |
Downside |
7.2 |
0.8 |
1.2 |
Stress |
13.0 |
1.3 |
2.3 |
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
42. 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 2024 is 67.7% (2023: 65.9%) 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 signi
ficantly to reduce the Group’s risk o
f 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 2024 there were 42 loans in 12 months arrears or more
with balances of £4.3m (2023: 43 loans totalling £4.0m).
The percentage of mortgages in arrears by 3 months or more remains at low levels for 2024.
Overall, by number of loans in arrears we have seen an increase of 0.22% to 0.94%, and by balance we have seen an
increase of 0.30% to 0.84%.
The Group's non-impaired commercial loan assets are also considered to be of a good credit quality.
Further specifics by type o
f mortgage lending are as follows:
Prime residential mortgage book
The prime residential mortgage book consists of traditional residential loans. No sub-prime or self-certi
fication
lending has been undertaken.
2024 |
2024 |
2023 |
2023 |
|
Loan to value (indexed) |
£m |
% |
£m |
% |
<70% |
2,557.0 |
56.5 |
2,274.6 |
56.6 |
70% - <80% |
758.2 |
16.8 |
673.8 |
16.8 |
80% - <90% |
802.9 |
17.7 |
592.8 |
14.7 |
>90% |
405.4 |
9.0 |
478.6 |
11.9 |
4,523.5 |
100.0 |
4,019.8 |
100.0 |
2024 |
2024 |
2023 |
2023 |
|
Payment status |
£m |
% |
£m |
% |
Not past due |
4,448.0 |
98.3 |
3,956.9 |
98.4 |
Past due up to 3 months |
41.1 |
0.9 |
36.9 |
0.9 |
3 to 6 months past due |
18.0 |
0.4 |
12.8 |
0.3 |
Over 6 months past due |
15.5 |
0.3 |
12.9 |
0.3 |
In possession |
0.9 |
0.1 |
0.3 |
0.1 |
4,523.5 |
100.0 |
4,019.8 |
100.0 |
The Group continued to experience a low level of possessions on residential loans and Law of Property Act receiver
appointments. At the end of 2024 the Group had
five possession properties in relation to owner occupied loans,
(2023: three possession properties).
Against past due and possession cases, £152.4m (2023: £123.5m) 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 92 residential loans in 2024
(2023: 157), with no alteration made to the contractual rates of interest and balances totalling £16.2m at 31
December 2024 (2023: £22.3m), this did not lead to any modification gain or loss a result o
f short-term forbearance
granted. Provisions of £0.4m (2023: £0.4m) 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.
188
187
Retail buy-to-let mortgage book
The retail buy-to-let (BTL) mortgage book consists of buy-to-let to individuals <£1m.
| 2024 | 2024 | 2023 | 2023 | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 300.8 | 78.2 | 312.4 | 80.2 |
70% - <80% | 72.9 | 18.9 | 68.8 | 17.7 |
80% - <90% | 10.0 | 2.6 | 7.8 | 2.0 |
>90% | 1.0 | 0.3 | 0.6 | 0.1 |
384.7 | 100.0 | 389.6 | 100.0 |
| 2024 | 2024 | 2023 | 2023 | |
Payment status | £m | % | £m | % |
Not past due | 377.3 | 98.0 | 383.0 | 98.2 |
Past due up to 3 months | 4.2 | 1.1 | 3.2 | 0.8 |
3 to 6 months past due | 0.6 | 0.2 | 2.6 | 0.7 |
Over 6 months past due | 2.4 | 0.6 | 0.7 | 0.2 |
In possession | 0.2 | 0.1 | 0.1 | 0.1 |
384.7 | 100.0 | 389.6 | 100.0 |
At the end of 2024 the Group had one BTL possession property, whose exposure was being managed by a Law of
Property Act receiver (2023: one).
Against past due and possession cases, £16.8m (2023: £13.6m) 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 four retail BTL loans in 2024
(2023: one loan). With no alteration made to the contractual rates of interest and balances totalling £1.1m at 31
December 2024 leading to no modification gain or loss recorded as a result o
f short-term forbearance granted. No
provisions are held against BTL mortgages that were granted forbearance during the year (2023: £nil).
Equity release mortgages denominated in £
The below analysis includes equity release mortgage lending but excludes the fair value adjustments detailed in
note 39.
2024 | 2024 | 2023 | 2023 | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 135.7 | 94.4 | 147.1 | 95.5 |
70% - <80% | 4.4 | 3.1 | 3.4 | 2.2 |
80% - <90% | 1.5 | 1.0 | 1.0 | 0.7 |
>90% | 2.2 | 1.5 | 2.5 | 1.6 |
143.8 | 100.0 | 154.0 | 100.0 |
2024 | 2024 | 2023 | 2023 | |
Payment status | £m | % | £m | % |
Not past due | 143.5 | 99.8 | 152.1 | 98.8 |
Over 6 months past due | - | - | 0.1 | 0.1 |
In possession / LPA receivership | 0.3 | 0.2 | 1.8 | 1.1 |
143.8 | 100.0 | 154.0 | 100.0 |
At the end of 2024 the Group had three possession properties in relation to equity release mortgages (2023: six).
Equity release mortgages denominated in €
The below analysis includes equity release mortgage lending but excludes the fair value adjustments detailed in
note 39.
2024 | 2024 | 2023 | 2023 | |
Loan to value (indexed) | €m | % | €m | % |
<70% | 3.4 | 8.4 | 3.4 | 7.1 |
70% - <80% | 4.9 | 12.0 | 5.2 | 10.9 |
80% - <90% | 5.2 | 12.8 | 6.2 | 13.0 |
>90% | 27.2 | 66.8 | 32.9 | 69.0 |
40.7 | 100.0 | 47.7 | 100.0 |
2024 | 2024 | 2023 | 2023 | |
Payment status | €m | % | €m | % |
Not past due | 40.7 | 100.0 | 47.7 | 100.0 |
40.7 | 100.0 | 47.7 | 100.0 |
Legacy lending books
The legacy lending books comprises the following:
2024 | 2024 | 2023 | 2023 | |
£m | % | £m | % | |
Loans secured on commercial property | 2.0 | 1.0 | 6.1 | 2.5 |
Loans secured on serviced apartments | 13.9 | 6.9 | 14.7 | 6.0 |
Specialist buy-to-let | 5.8 | 2.9 | 13.3 | 5.4 |
Loans to housing associations | 179.2 | 89.2 | 211.9 | 86.1 |
200.9 | 100.0 | 246.0 | 100.0 |
Loans secured on commercial property
2024 | 2024 | 2023 | 2023 | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 2.0 | 100.0 | 4.0 | 65.6 |
70% - <80% | - | - | 0.8 | 13.1 |
80% - <90% | - | - | 0.6 | 9.8 |
>90% | - | - | 0.7 | 11.5 |
2.0 | 100.0 | 6.1 | 100.0 |
2024 | 2024 | 2023 | 2023 | |
Payment status | £m | % | £m | % |
Not past due | 2.0 | 100.0 | 6.1 | 100.0 |
2.0 | 100.0 | 6.1 | 100.0 |
2024 | 2024 | 2023 | 2023 | |
Diversification by industry type | £m | % | £m | % |
Retail | - | - | 2.5 | 41.0 |
Office | - | - | 0.7 | 11.5 |
Hotel / leisure | 1.3 | 65.0 | 2.6 | 42.6 |
Other | 0.7 | 35.0 | 0.3 | 4.9 |
2.0 | 100.0 | 6.1 | 100.0 |
At 31 December 2024, the Group had no commercial investment loans in arrears of 3 months or more (2023: none).
No loan that would be past due or impaired had their terms renegotiated.
The Group had no commercial loans in possession or subject to LPA receivership at the end of 2024 (2023: none).
The Group did not grant forbearance against any loans secured on commercial property in 2024 (2023: none).
Loans secured on serviced apartments
2024 | 2024 | 2023 | 2023 | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 2.3 | 16.5 | 2.1 | 14.3 |
70% - <80% | 6.6 | 47.5 | 7.1 | 48.3 |
80% - <90% | 5.0 | 36.0 | 5.5 | 37.4 |
13.9 | 100.0 | 14.7 | 100.0 |
2024 | 2024 | 2023 | 2023 | |
Payment status | £m | % | £m | % |
Not past due | 13.0 | 93.5 | 14.1 | 95.9 |
Past due up to 3 months | 0.4 | 2.9 | - | - |
LPA receivership | 0.5 | 3.6 | 0.6 | 4.1 |
13.9 | 100.0 | 14.7 | 100.0 |
The Group had two serviced apartments loans in possession or subject to LPA receivership at the end of 2024
(2023: two).
Against cases where an LPA appointment has been made, £0.6m collateral is held.
The Group did not grant forbearance against any loans for serviced apartments during the year.
Legacy buy-to-let
The legacy residential mortgage book consists of residential investment loans, loans secured on buy-to-let
properties to corporates, and loans secured on buy-to-let properties to individuals, where the Group’s exposure to
the borrower is larger than £1m.
2024 | 2024 | 2023 | 2023 | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 5.0 | 86.2 | 13.3 | 100.0 |
70% - <80% | 0.8 | 13.8 | - | - |
5.8 | 100.0 | 13.3 | 100.0 |
2024 | 2024 | 2023 | 2023 | |
Payment status | £m | % | £m | % |
Not past due | 5.8 | 100.0 | 13.3 | 100.0 |
5.8 | 100.0 | 13.3 | 100.0 |
There are no past due or possession cases in 2024 (2023: none). For 2024, no collateral (2023: £nil) was held
against past due and in possession cases.
At 31 December 2024, the Group had no specialist buy-to-let loans in arrears of 3 months or more (2023: none). No
loans that would be past due or impaired have had their terms renegotiated.
The Group did not grant forbearance against any loans secured on specialist buy-to-let property in 2024
(2023: £nil).
192
191
Loans to housing associations
2024 | 2024 | 2023 | 2023 | |
Loan to value (unindexed) | £m | % | £m | % |
<70% | 66.9 | 37.3 | 98.1 | 46.3 |
70% - <80% | 112.3 | 62.7 | 92.9 | 43.8 |
80% - <90% | - | - | 20.9 | 9.9 |
179.2 | 100.0 | 211.9 | 100.0 |
Loans to housing associations are secured on residential property. No housing association loans are past due
or impaired.
Purchased or originated credit impaired loans (POCI)
The below analysis shows the status of the Group’s POCI and how they are distributed across loan to value bands.
2024 | 2024 | 2023 | 2023 | |
£m | % | £m | % | |
Gross exposure | 7.4 | 100.0 | 11.5 | 100.0 |
Fair value adjustment | (2.1) | (28.4) | (3.8) | (33.0) |
5.3 | 71.6 | 7.7 | 67.0 |
2024 | 2024 | 2023 | 2023 | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 2.8 | 52.8 | 3.0 | 39.0 |
70% - <80% | - | - | - | 0.0 |
80% - <90% | 1.4 | 26.4 | 2.0 | 26.0 |
>90% | 1.1 | 20.8 | 2.7 | 35.0 |
5.3 | 100.0 | 7.7 | 100.0 |
2024 | 2024 | 2023 | 2023 | |
Payment status | £m | % | £m | % |
Not past due | 2.2 | 41.6 | 4.9 | 63.6 |
Past due up to 3 months | - | - | 0.2 | 2.6 |
3 to 6 months past due | 0.1 | 1.8 | 0.5 | 6.5 |
Over 6 months past due | 1.8 | 34.0 | 1.3 | 16.9 |
In possession / LPA receivership | 1.2 | 22.6 | 0.8 | 10.4 |
5.3 | 100.0 | 7.7 | 100.0 |
The Group had two POCI loans in possession or subject to LPA receivership at the end of 2024 (2023: two).
POCI loans relate to legacy residential and commercial lending which was acquired credit impaired as part of the
merger with Manchester Building Society. The lending is outside of the Group’s current lending policy.
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 2024. The Group’s mortgage portfolio is diversi
fied across the UK.
Prime | ||||
Residential | Buy-to-let | Total | Total | |
Region | £m | £m | £m | % |
North East | 480.1 | 6.9 | 487.0 | 9.9 |
East of England | 368.0 | 42.0 | 410.0 | 8.4 |
East Midlands | 312.6 | 15.0 | 327.6 | 6.7 |
Northern Ireland | 1.7 | 0.2 | 1.9 | 0.0 |
North West | 524.3 | 20.9 | 545.2 | 11.1 |
Scotland | 505.7 | 6.1 | 511.8 | 10.4 |
South East | 601.4 | 70.9 | 672.3 | 13.7 |
South West | 363.1 | 24.1 | 387.2 | 7.9 |
Wales | 145.4 | 6.0 | 151.4 | 3.1 |
West Midlands | 318.3 | 17.2 | 335.5 | 6.8 |
Yorkshire | 396.6 | 12.1 | 408.7 | 8.3 |
London | 495.8 | 163.3 | 659.1 | 13.4 |
Other | 10.5 | - | 10.5 | 0.3 |
Total | 4,523.5 | 384.7 | 4,908.2 | 100.0 |
194
193
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 the 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 2024 the LCR was 229% (2023: 227%).
Contractual maturity profile o
f
financial assets and liability
The table below analyses the contractual cash flows o
f
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.
Repayable on
Up to 3
More than 5
At 31 December 2024
demand
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
Repayable on |
Up to 3 |
More than 5 |
||||
At 31 December 2023 |
demand |
months |
3-12 months |
1-5 years |
years |
Total |
£m |
£m |
£m |
£m |
£m |
£m |
|
Assets |
||||||
Cash and balances with the Bank of England |
525.5 |
- |
- |
- |
- |
525.5 |
Loans and advances to credit institutions |
109.8 |
- |
- |
- |
- |
109.8 |
Debt securities |
- |
99.2 |
203.8 |
264.8 |
47.2 |
615.0 |
Derivative financial instruments |
- |
0.2 |
1.6 |
38.8 |
10.3 |
50.9 |
Loans and advances to customers |
- |
60.7 |
191.7 |
845.0 |
3,762.3 |
4,859.7 |
Other financial assets |
- |
5.7 |
0.3 |
- |
- |
6.0 |
Total financial assets |
635.3 |
165.8 |
397.4 |
1,148.6 |
3,819.8 |
6,166.9 |
Liabilities
Due to Members |
4,282.8 |
125.9 |
320.4 |
285.2 |
- |
5,014.3 |
Due to other customers |
145.7 |
88.0 |
26.1 |
2.5 |
- |
262.3 |
Deposits from credit institutions |
- |
14.9 |
164.1 |
359.7 |
- |
538.7 |
Derivative financial instruments |
- |
0.2 |
0.2 |
11.8 |
49.5 |
61.7 |
Other financial liabilities |
- |
3.6 |
0.8 |
2.5 |
4.0 |
10.9 |
Total financial liabilities |
4,428.5 |
232.6 |
511.6 |
661.7 |
53.5 |
5,887.9 |
Net liquidity gap (contractual) |
(3,793.2) |
(66.8) |
(114.2) |
486.9 |
3,766.3 |
279.0 |
Liquidity risk outlook
The Group has £359.3m (2023: £521.7m) of Term Funding Scheme (TFS) and Term Funding for SMEs (TFSME)
drawings which are due to be repaid during 2025. The Group’s plans to replace these funds are well advanced and
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
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 the 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 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 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.
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 biggest building society in the North East and the 7th largest in the UK with assets
of £6.6 billion (2023: £6.2 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 o
f 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 be
fore taxation are compiled from the Newcastle Building Society Group
consolidated financial statements
for the year ended 31 December 2024, 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 £152.9m (2023: £137.9m), 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 2024. 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 2024 tax losses from previous years that were used to extinguish a portion of its
taxable profits in 2024.
Other differences between when income and expenses are accounted for under IFRSs and when they
become taxable.
During 2024 the Group paid £2.9m in corporation tax (2023: £7.0m).
d) Full-time equivalent employees
The average number of Group full time equivalent employees was 1,671.4 (2023: 1,547.3) all of which were employed
in the UK.
e) Group profit be
fore taxation
Group profit be
fore taxation was £15.7m (2023: £29.1m) with a tax credit of £1.2m (2023: £7.0m tax charge). The
profit be
Greenhub,
Middlesbrough
196
195
Barnard Castle,
County Durham
Information
Other
198
197
Annual Business Statement
for the year ended 31 December 2024
1. Statutory percentages
2024
Statutory
%
%
Lending limit
1.87%
25.0
10.8%
50.0
Funding limit
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.
1. Statutory percentages
2024
2023
As a percentage of shares and borrowings:
%
%
Gross capital
6.57
5.52
Free capital
5.78
4.85
Liquid assets
18.97
21.50
Result for the year as a percentage of mean total assets
0.26
0.38
Management expenses as a presentage of mean total assets
1.86
1.85
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 but exclude liquid assets pledged under repo agreements
and includes collateral.
Shares and borrowings represent the total of shares, amounts owed to credit institutions and amounts owed to
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 2024 and 2023 total assets.
Directors' other directorships and other interests
Directors at 31 December 2024
Date of Birth
Date of Appointment
Business Occupation
GA Bennett
MA
10.02.61
24.04.19
Non-Executive Director
Other Directorships:
Darkwood Croft Management Company Limited, MAM Properties Limited,
MBS (Mortgages) Limited
RTS Campbell
24.04.78
01.06.24
Non-Executive Director
Other Directorships:
Ignite Consulting Trustee Limited , New Vantage Consulting Limited, Visiting
Fellow of Nottingham Business School, Fellow of RSA (The Royal Society for the
Encouragement of Arts, Manufactures and Commerce), Deloitte LLP- client of New
Vantage Consulting Limited
MJ Faull
FCCA
24.11.60
23.08.21
Non-Executive Director
Other Directorships:
IQUW Syndicate Management Limited, The Line Art Walk, The Line Public Art Walk CIC,
Henry’s of Harbury Management Company Limited
BP Glover
LLB, ACIB
03.07.60
11.08.17
Company Director
Other Directorships:
Newcastle Strategic Solutions Limited, Advance Mortgage Funding Limited,
First Complete Limited, Personal Touch Financial Services Limited, Tenetlime Limited,
United Trust Bank Limited
AS Haigh
BSc
26.01.63
27.01.14
Building Society Chief Executive Officer
Other Directorships:
Newcastle Financial Advisers Limited, Community Foundation serving Tyne & Wear and
Northumberland, North East Chamber of Commerce
A Laverack
BA
08.06.61
7.07.17
Non-Executive Director
(Business name: Anne Shiels)
Other Directorships:
Newcastle Financial Advisers Limited, Anne Shiels Consulting Limited, Infantry Training
(Catterick) Advisory Board (Member)
S Miller
BSc, ACIB
16.10.70
16.01.18
Building Society Customer Director
Other Directorships:
Newcastle Financial Advisers Limited, Newcastle Strategic Solutions Limited
JDA Ramsbotham
CBE, DL
30.08.59
23.08.21
Non-Executive Director
Newcastle Strategic Solutions Limited, High Doctor Pasture Caravan Park Limited
Other Directorships:
Altruism Limited, Willan Trustee Limited, 170 Tachbrook Street Management Limited (Co. 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
DA Samper
BA, CA
21.12.74
20.12.18
Building Society Chief Financial Officer
Other Directorships:
None
AD Shepherd
24.05.73
03.12.24
Building Society Chief Operating Officer
Other Directorships:
Newcastle Strategic Solutions Limited, Make Living Beautiful Properties Limited
MR Thompson
BA, FCA
11.10.61
29.01.19
Non-Executive Director
Atlas Cloud Limited, Newcastle United Foundation, The Clinkard Group Limited, Clinkard Holdings
Other Directorships:
Limited, NorthStandard Limited, NorthStandard EU Designated Activity Company, Tyne and Wear
Building Preservation Trust Limited, 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,
excepting A S Haigh who was appointed to the role of Chief Executive on 1 May 2015, having previously held the
role of Chief Operating Officer. There are no contracts for Non-Executive Directors and no compensatory terms for
loss of office.
Principal office
the Society’s principal office is 1 Cobalt Park Way, Wallsend, NE28 9EJ
199
200
Individual Liquidity Guidance (ILG)
- Guidance from the
PRA on the minimum quantity of a
firm’s liquidity
resources and the firm’s
funding pro
file.
Individually / collectively assessed
- Individual
assessments are made of all mortgage loans where
objective evidence indicates losses are likely or the
property is in possession. A collective impairment
provision is made against the remaining group of loans
and advances where objective evidence indicates that it
is likely that losses may be incurred.
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 out
flows
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.
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.
Set out below are the definitions o
f 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 pro
fits.
Common Equity Tier 1 ratio
- Common Equity Tier 1
capital as a percentage of risk weighted assets.
Contractual maturity
- The final payment date o
f 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 bene
fit o
f 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 o
f
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 (EIR)
- 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 o
f 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.
Gross capital
- The aggregate of general reserve,
available-for-sale reserve, subscribed capital and
subordinated liabilities.
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.
Glossary
201
202
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 o
f
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.
Glossary
| Continued
Alnwick
- 28 Bondgate Within, NE66 1TD
Ashington
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Barnard Castle
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Berwick Upon Tweed
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Bishop Auckland
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Carlisle
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Consett
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Cramlington
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Darlington
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- 28 Front Street, NE16 4DT
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- 303 Whitley Road, NE26 2HU
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Yarm
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