Nationwide feels cold as loans slump

PROFITS fell for the second year running at Nationwide Building Society as mortgage lending slumped by a third.

The biggest building society’s annual pre-tax profit was down 7.3 per cent to £977million after it bought back £116million of debt.

Its net mortgage lending fell from £8.8billion to £5.8billion and its share of the market nearly halved from 25.4 per cent to 13 per cent.

Tighter affordability criteria for landlords hit buy-to-let lending, while the major banks have returned to the mortgage market after ringfencing their high street operations from riskier parts of their business.

Profit margins were squeezed as it was forced to reduce mortgage rates and it expects market conditions to remain “highly competitive”.

Chief executive Joe Garner said members had benefited to the tune of £560million as Nationwide maintained higher rates for savers than its rivals.

It also led the field in current account openings, up from 795,000 the previous year to 816,000. Garner said: “In an industry notorious for customer inertia, Nationwide is making a real difference to the current account market.

“We had our best-ever year for current accounts and continue to perform well on switching.”

Nationwide is competing for a share of a £425million fund to boost competition in the small business lending market, which Royal Bank of Scotland has to hand out to satisfy state aid rules after its taxpayer bailout.

Garner said: “We believe Nationwide could transform choice for the UK’s small businesses in the way we have become top choice for personal current accounts.

“If we are successful with our application for funding, we intend to roll out a mutual business alternative to the big five banks, nationwide.”

Garner acknowledged the economy had proved “considerably more resilient” than some people feared after the Brexit referendum but the pace of growth is likely to remain “relatively subdued”.