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Mr Wyles, non-executive director of non-retail business for Nationwide, said the 40 per cent fall in net residential lending in the lender's annual results had been part of a plan to contain lending volumes.

He said the lender had written about 70 per cent of its natural market share and expected to do the same in the next 12 months.

Mr Wyles said: "We are seeing some respected global commentators saying this is not over yet and there are more shocks to come so I do not think we can assume it will be plain sailing from here.

"It could still be a very bumpy ride between here and normality and so we will continue to manage the growth of our balance sheet cautiously until we are confident the recovery is well established and sustainable."

In its annual results for the year ending 4 April, Nationwide reported a fall in group residential net lending from £11.2bn in 2007 to £6.7bn.

Group commercial lending also fell by 29.4 per cent from £3.4bn in 2007 to £2.4bn.

Despite this the lender reported a rise in its underlying pre-tax profit of 17 per cent up by £112.5m to £781.1m.

Reported profit before tax was up 5 per cent to £686.1m.

Graham Beale, chief executive of Nationwide, said: "Nationwide has an inherently conservative business model with a strong capital base, high levels of retail funding and a low loan to deposit ratio.

"We funded our net lending in the year entirely from retail receipts. Our consistently prudent approach to lending over a number of years during which we have focused on quality rather than volume, means our arrears remain at very low levels, and are less than a third of the industry average.

"While the environment will remain challenging, the market now has a much more transparent and realistic view of the cost of risk. Through ongoing prudent cash flow management and disciplined risk based decisions, I am confident Nationwide will continue to provide its customers and members with the security and value for which we are known."

Sarah Gwilt, mortgage associate for Birmingham-based IFA Essential Money, said: "Nationwide is a balance sheet lender so it is looking fairly steady.

"Even though it has reduced the amount of lending it is doing profits will still be higher or the same because of the higher margins it is making more money on the lending."