Nationwide Building Society Silverstone Presentation January 2015

Nationwide Building Society Q1 Results Presentation For the quarter ending 30th June 2015

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Contents

Q1 Highlights 3

Business Overview 6

Appendices 12

Unless stated otherwise, information within this presentation is based on our Q1 Interim Management Statement, as of 30th June 2015

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Q1 Highlights

Q1 Highlights Strong financial performance with underlying profit before tax up 52% at £400m due to higher net

interest income and lower impairment provisions

Solid trading performance with gross mortgage lending up 17.2% to £6.8bn, member deposit balances¹ increasing to £132.5bn and 115,000 new current accounts opened gaining 7.4% of gross switchers

Robust capital position with a best in peer group2 CET1 ratio up 1.0% to 20.8%3 and our leverage ratio strengthening by 0.1% to 4.2%3

Continued to innovate as one of the first UK financial services providers to introduce Apple Pay,

introducing access to current account balance information on Apple Watch and enabling members to send and receive payments using mobile telephone numbers via Paym

Number one for customer satisfaction within our high street peer group; with a lead over the nearest competitor at 30 June 2015 of 6.0%4

Stable credit ratings following reaffirmation at ‘A’ from S&P due to our low-risk business model and internal capital generation, an upgrade from Moody’s to ‘A1’ because of our standalone credit strength and affirmation at ‘A’ by Fitch5

Continued re-engagement with wholesale funding markets through further benchmark issuances enhancing Nationwide’s already robust liquidity position, with LCR increasing to 133.7%

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¹ Includes current account credit balances

2 Peer group defined as Lloyds Bank, RBS, HSBC, Barclays and Santander 3 The capital ratios provided have been calculated under CRD IV on an end point basis. The leverage ratio is calculated using the CRR definition of Tier 1 for the capital amount and the delegated act definition of the exposure measure. 4 © GfK 2015 (FRS), Financial Research Survey (FRS), 3 months of interviews conducted between April 2015 and June 2015, c. 15,000 adults interviewed, proportion of extremely/very satisfied customers minus proportion of extremely/very/fairly dissatisfied customers summed across current account, mortgage and savings, high street peer group defined as Barclays, Halifax, HSBC, Lloyds Bank (inc. C&G), NatWest and Santander. 5 Last ratings actions from S&P, Moody’s and Fitch were in June 2015.

Financial and Trading Performance NIM increased 16bps, driven by the market fall in retail

funding costs. A modest reduction in NIM is expected over the remainder of the financial year as a result of increased competition in the mortgage market

Income growth exceeded underlying cost growth resulting

in a 30bps improvement in CIR. The phasing of costs within the year, combined with our margin expectations, means the full year cost income ratio is likely to be higher

Underlying profit was up 52% due to higher net interest income and lower impairment provisions

Comparisons based on Q1 2014/15

UNDERLYING COST INCOME RATIO

NET INTEREST MARGIN

UNDERLYING PROFIT BEFORE TAX

STATUTORY PROFIT BEFORE TAX

51.2%

163bps

£400m

£379m

30bps

16bps

52%

50%

5

RESIDENTIAL LENDING BALANCES

PCA OPENING2

CET1 RATIO

£154.9bn

115,000

20.8%

£2.0bn

5,000

100bps

MEMBER DEPOSITS¹ £132.5bn £0.1bn

Residential lending balances continued to grow through the quarter, increasing by £2.0bn

Member deposits¹ increased £0.1bn, reflecting the impact of NS&I Pensioner Bonds

The Group opened 115,000 new current accounts and was a net beneficiary of the current account switching service, gaining 7.4% of gross switchers

CET1 ratio increased to 20.8%, following a strong trading performance and lower risk weighted assets

The leverage ratio increased to 4.2% LEVERAGE RATIO 4.2% 10bps Comparisons based on FY 2014/15

¹ Includes current account credit balances 2 Comparison based on Q1 2014/15

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Business Overview

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Business Overview

Top 3 UK mortgage and savings provider UK’s largest building society with national and multi-channel distribution

£198.0bn assets 15m members and customers, 700 branches across the UK and online, mobile and telephone banking services

Significant share of UK retail banking market UK mortgage market share: 12.2%; 2nd in the UK1

UK savings market share: 10.1%; 3rd in the UK1

UK current account market share: 6.8%1

Robust balance sheet Top CET1 ratio in peer group at 20.8%2

Improvement in leverage ratio to 4.2% LCR ratio increased to 133.7%

Strong credit ratings S&P: LT: A ST: A-1 Outlook: Stable Moody’s: LT: A1 ST: P-1 Outlook: Stable Fitch: LT: A ST: F1 Outlook: Stable

Prudent, low risk business model Average indexed mortgage book LTV 55% 3 months + arrears on residential mortgage book of 0.47%

Industry leading customer satisfaction Ranked number 1 for customer satisfaction within our high street peer group3 In the top 10 out of 225 organisations in the UK Customer Satisfaction Index, the highest ranking high street financial services provider4

¹ Market share figures are Nationwide’s management estimates using corporate disclosures and market research from GfK. 2 Peer group comparison based on Lloyds, Santander UK, RBS, HSBC and Barclays. Competitor information is based on corporate disclosures dated 31st March 2015. 3 © GfK 2015 (FRS), Financial Research Survey (FRS), 3 months of interviewed conducted between April 2015 and June 2015, c. 15,000 adults interviewed, proportion of extremely/very satisfied customers minus proportion of extremely/very/fairly dissatisfied customers summed across current account, mortgage and savings, high street peer group defined as Barclays, Halifax, HSBC, Lloyds Bank (inc. C&G), NatWest and Santander. 4 July 2015 survey published by the Institute of Customer Service. High street financial services provider defined as Lloyds Bank, TSB, Halifax, RBS, NatWest, Santander, HSBC, Barclays and Co-op.

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Financial Performance

1Information as at 4th April 2015 (FY 2014/15)

1,509 1,590 1,981

2,403

2,861

0.80 0.81

1.02

1.25

1.46

2011 2012 2013 2014 2015

Net Interest Income (£m) Net Interest Margin

NIM increased 21bps in FY 2015, driven by the market fall in retail funding costs

Q1 2015 – NIM in the quarter was 1.63%. This increase has been driven by the market fall in retail funding costs over the last 12 months. A modest reduction in the net interest margin is expected over the remainder of the year as a result of increased competition in the mortgage market

Impairments fell by 34% in FY 2015 to £251m. This improvement is almost entirely due to reduced CRE losses

We consider our CRE deleveraging programme essentially complete

Q1 2015 – Credit performance in the quarter has been strong with negligible net impairments. This reflects the continuation of improving market conditions and deleveraging of CRE assets in 2014/15

184 139

95 60 147

175 247

493

309 52

66 42

3

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52

2011 2012 2013 2014 2015

Treasury & Other Commercial Lending Retail Lending

Net Interest Margin1

Impairments (£m)1

425 428

591

383

251

9%

The average LTV of the mortgage book (by value) at FY 2015 was 56% (2014: 58%)

The average LTV (by value) on new lending was down to 69% (2014: 73%)

The proportion of mortgages in arrears was 0.49% at FY 2015 (2014: 0.63%), significantly below the Council of Mortgage Lenders average of 1.30%

Q1 2015

The book LTV (by value) decreased in Q1 2015 to 55%

The new lending LTV (by value) remained at 69% in the quarter

The proportion of residential mortgage arrears continued to decrease, down to 0.47%

Assets

€ £ $

$

£

€ € €

£

£

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104.3 105.6 110.6 119.3 124.5

20.3 23.2 24.8 26.3 28.2

2.8 3.0 3.4

3.7 3.6

22.0 21.5 19.0 16.3

12.9 31.9 34.3 23.8 18.0 18.8 7.7

8.5 9.1 6.3 7.6

2011 2012 2013 2014 2015

Other Assets

Liquidity

Commercial Lending

Consumer Banking

Specialist Lending

Prime Mortgages

< 50% 34%

50% - 60% 19%

60% - 70% 21%

70% - 80% 17%

80% - 90% 7%

90% - 100% 1%

> 100% 1%

Residential mortgage balances by LTV1 Proportion of mortgage arrears (3mths+) 1

CML Average NBS Prime

Balance Sheet Evolution (Assets/£bn) 1

1Information as at 4th April 2015 (FY 2014/15)

CML BTL CML Average

NBS BTL NBS Specialist

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Capital

14.5%

19.8% 20.8%

2.0%

2.2%

1.4% -0.3%

FY 2014 Profits Net ELreduction

RWAs Otherreserves

FY 2015 Q12015/16

3.4%

4.1% 4.2%

0.4%

0.4% -0.1%

FY 2014 Profits Net ELreduction

Otherreserves

FY 2015 Q12015/16

CET1 Ratio Leverage Ratio

During 2014/15 our CET1 ratio increased 530bps to 19.8% and our leverage ratio increased 70bps to 4.1%

CET1 and leverage ratios increased due to a strong financial performance and a reduction in the excess of expected losses over impairment provisions

Reduction in expected losses is primarily a result of continued deleveraging of the non-core commercial real estate portfolio and out of policy treasury assets

Q1 2015

CET1 increased an additional 100bps to 20.8% and leverage an additional 10bps to 4.2%. This increase was due to continued strong financial performance and lower risk weighted assets

Lower risk weighted assets came as a result of reduced CRE exposures and improved asset quality on our buy to let portfolio

19.8% CET1 Ratio 14.5%

CET1 Ratio

Movements in CET1 Ratio & Leverage Ratio1

£10bn

£9bn

£8bn

£7bn

£6bn

£5bn

£4bn

£3bn

£2bn

£1bn

£0bn

27.0%

3.4% Leverage

Ratio1

4.1% Leverage

Ratio

2015

19.8% CET1 Ratio

2014

22.1%

14.5% CET1 Ratio

Common Equity Tier 1 Additional Tier 1 Tier 2

1Information as at 4th April 2015 (FY 2014/15)

Capital and PIBS £10.2bn

Other Liabilities £7.7bn

Retail Savings £138.5bn

Securitisations £4.8bn MTN

£5.2bn

Covered Bond £11.3bn

CP £2.4bn

CDs £3.1bn

Deposits2 £11.0bn

Other £1.4bn

Wholesale Funding £39.2bn

Funding Breakdown¹ Nationwide values a diversified wholesale funding platform

At 4 April 2015, debt securities in issue were £28.1bn

Nationwide prioritises funding from core funding programmes

- EMTN (senior EUR/GBP) - US MTN (senior USD) - Covered Bond

(EUR/GBP) - RMBS (USD/EUR/GBP) - Private placements

In the last financial year we

issued £8bn across these programmes

¹ Information as at 4th April 2015 (FY 2014/15) ² Other deposits comprise wholesale deposits placed with the Treasury Division, commercial deposits which are managed by the retail business and amounts relating to the sale of PEBs by the Group on behalf of Legal & General ³ Excluding FLS 4 Issuance amounts shown in sterling equivalents, translated at swap rate at issuance

Funding

Wholesale funding 3 residual maturity (£bn)¹

Short-term wholesale funding programmes

Long-term wholesale funding programmes

Public issuance (£m) – last 12 months4

Covered Bond

RMBS

Senior Unsecured

€ £ € $

$

£

€

€ € €

£

£

11

< 1 year 18.3

1-2 years 3.6

2-5 years 7.5

> 5 years 9.8

€ $ €

€ £ € $

£ £ €

€

$

0

500

1000

1500

2000

2500

Oct-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jul-15

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Appendices

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UK Capital Requirements CRD IV capital requirements took effect from January 2014, these are summarised in the table below Leverage ratio requirements, as implemented in the UK, are also shown below

* From January 2016 the Capital Planning Buffer will be renamed as the PRA Buffer

Risk Based Capital Requirements

2015 2016 2017 2018 2019

Pillar 1

CET1 4.5%

Tier 1 6.0%

Total Capital 8.0%

Pillar 2A

CET1 56% of total Pillar 2A requirements

Tier 1 75% of total Pillar 2A requirements

Total Capital 100% of total Pillar 2A requirements

CRD IV Buffers

Countercyclical Buffer (CET1) At the discretion of the FPC and foreign regulators (0-2.5%)

Capital Conservation Buffer (CET1) 0.625% 1.25% 1.875% 2.5%

Systemic Risk Buffer (CET1) - - - - 0-3%

Pillar 2B Capital Planning Buffer* (CET1) Total CPB, offset by any Capital Conservation Buffer and Systemic Risk Buffer

Leverage Requirements

Leverage

Minimum Requirement (Tier 1) 3% Countercyclical Leverage Buffer (CET1) 35% of risk based Countercyclical Buffer (0-0.9%)

Supplementary Leverage Buffer (CET1) - - - -

35% of Systemic Risk Buffer (0-

1.05%)

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Credit Ratings

Long Term Short Term AT1 Tier 2 Outlook

Standard & Poor’s A A-1 BB+ BBB Stable

Moody’s A1 P-1 - Baa1 Stable

Fitch A F1 BB+ A − Stable

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S&P reaffirmed Nationwide’s ‘A’ rating despite the removal of two notches of government support. One notch was added for additional loss-absorbing capacity and a further notch was added for asset quality and internal capital generation. Moody’s upgraded Nationwide to ‘A1’ from ‘A2’. The upgrade was underpinned by the standalone credit strength and strong capitalisation. Fitch reaffirmed Nationwide’s ‘A’ rating due to strong franchise in the UK mortgage and savings markets, well performing loan book, conservative funding and liquidity profile and strengthened capital ratios.

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