Nationwide BSAug 10 2018

Nationwide profits drop despite lending increase

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Nationwide profits drop despite lending increase

Nationwide Building Society has reported a drop in profits in the first financial quarter of this year, despite a growth in mortgage lending.

In its interim management statement for April to June 2018, the building society recorded £281m statutory profit before tax, down from £322m in June 2017, and an underlying pre-tax profit of £270m.

Nationwide has predominantly attributed the drop in comparable profits to a one-off gain of £26m in 2017 from the sale of the society’s investment in mastercard company VocaLink.

Net interest margin for the first financial quarter dropped 7 basis points on the year before from 1.35 per cent to 1.28 per cent - a drop Nationwide reported to have been expected as borrowers continue to switch to lower priced products in a “highly competitive” market.

Nationwide reported it anticipates the run-off of their base mortgage rate balances, which have fallen to £22bn, will continue as market conditions remain competitive and expect the society’s reported margin to trend lower during the remainder of the year.

The building society’s gross mortgage lending increased 3.7 per cent to £8.4bn compared to the same point last year and member deposit balances grew by £4.2bn to £152.2bn - a growth attributed to the success of Nationwide’s single access and loyalty Isas and higher current account balances.

Joe Garner, chief executive at Nationwide Building Society, said as a member-owned organisation, Nationwide was committed to delivering exceptional value and service to members rather than seeking to maximise profits.

He said: "Nationwide has made a strong start to the year, opening more current accounts than any other brand and attracting higher gross mortgage lending and member deposits than last year."

Mr Garner said Nationwide’s outlook remained unchanged from the full year, expecting the economy to grow at a modest pace over the next 12 months.

He said: "We are observing consumers adapting their behaviours in response to the pressure on disposable income and the housing market looks set to remain relatively subdued with house prices broadly flat in 2018 - against this background, we also expect intense competition to persist in our core markets."

rachel.addison@ft.com