Nationwide profits down as buy-to-let home loans slide

Quarterly earnings fall to £301m from £368m last time as lending tightened

Nationwide is braced for a period of “prolonged economic uncertainty” as the building society posted profits down nearly a fifth amid a slide in mortgage lending.

The lender said yesterday that the buy-to-let market had been hit particularly hard in the three months to June, when group underlying profits fell 18 per cent to £301 million. That compared with £368m last time.

Statutory pre-tax profits fell to £322m from £401m. Nationwide put most of the bottomline earnings decline down to an exceptional £100m gain in its first financial quarter last year when it sold its investment in Visa Europe.

Nationwide bought the profitable core of Dunfermline building society, Scotland’s largest, in 2009 after the latter got into trouble because of toxic property loans.

But the society said yesterday that gross mortgage lending fellto£8.1billioninthequarter from £8.6bn, while net mortgage lending declined to £2.4bn from £3.5bn.

Nationwide attributed the reduction in buy-to-let mortgage lending to the rise in stamp duty for such properties last year and a tightening of the society’s lending criteria.

Group chief executive Joe Garner gave warning that, while the society’s research shows consumers expect Brexit to leave their ability to access credit unchanged, there were choppy waters ahead.

He said: “It will be important for lenders to balance carefully credit supply with affordability as we seek to support the long-term interests of consumers in a responsible way through any potential economic slowdown ahead.

“In a period of potentially prolonged economic uncertainty and persistently low interest rates, Nationwide continues to invest in products and services to support the long-term needs of our members.” Nationwide added that more people opened a current account with it than with any other provider as it attracted 202,000 new customers in the latest period – a 17 per cent increase. Customers’ deposits rose £1.3bn.

The fall in mortgage lending saw the group’s market share of the home loans sector fall to 13 per cent from 15 per cent a year earlier.

A Nationwide spokesman said the society expected its buy-to-let lending to remain “broadly flat”. He added that the group had “raised the bar for landlords’ affordability before most other lenders with the aim of helping ensure ourborrowerscanmeetfuture repayments”.

In recent months, Garner has streamlined Nationwide’s business model, exiting product lines such as car insurance and inheritance tax.

Despite the profits fall, he said earnings remained “comfortably within our strategic target range”.

The underlying cost/income ratio – a key metric in banking – in the first quarter was 58.8 per cent, up from 53.6 per cent a year ago.

mflanagan@scotsman.com