There’s choppy waters ahead, says Nationwide
NATIONWIDE SAID profits tumbled in the first quarter as it braces for a period of potential “prolonged economic uncertainty” amid a retreat from the buy-to-let market.
The building society said underlying pre-tax profits fell 18 per cent to £301m in the three months to June 30.
Nationwide warned that while the building society’s research shows that consumers expect Brexit to leave their ability to access credit unchanged, there are choppy waters ahead.
Chief executive Joe Garner 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.“
The society’s statutory pre-tax profits fell from £401m to £322m during the three-month period.
It put the decline down to a non-recurring £100m gain in the first quarter of last year from the sale of its investment in Visa Europe. Mr Garner said profit remains in its target range.
The figures also show that gross mortgage lending fell from £8.6bn to £8.1bn over the three months, while net mortgage lending fell to £2.4bn from £3.5bn.
Nationwide put this down to a reduction in buy-to-let advances as a result of the increase in stamp duty for such properties that came in last year, and changes to its lending criteria.
Nationwide also said that more people opened a current account with the building society than with any other provider as it saw a total of 202,000 new customers in the period, a 17 per cent rise on last year.
The group, Britain’s secondbiggest provider of mortgages, has in recent months pared back its business model, cutting product lines such as car insurance and inheritance tax and planning to focus more on its core product of home loans.
The lender said that although the British public had become less optimistic about the economic outlook, research conducted for its Brexit Consumer Support Panel showed the majority of consumers expect Britain’s EU exit to leave their ability to access credit unchanged.
On Friday the influential think tank EY Item Club said the UK’s financial services sector is bracing for a slowdown as choppy economic conditions apply the brakes to mortgage and business lending.
The stock of mortgage lending is expected to ease back to £1,184bn next year, down from £1,192bn in 2017.
EY Item Club said mortgage demand will be hit by the inflationary squeeze on household finances, but stocks will pick up to £1,196bn and £1,226bn in 2019 and 2020 respectively.
Business lending is also expected to suffer, falling from £425bn this year to £424bn in 2018, before returning to growth in 2019 at £427bn and stepping up again to £435bn by the end of the decade.
However, Omar Ali, EY’s UK financial services managing partner, said the growth swing for both areas would depend on Britain striking a transitional deal during its divorce talks with the European Union.
“Even modelling for a Brexit transitional deal, the outlook for 2018 remains tough for financial services as the impact of higher inflation is felt by households up and down the country,” he said.
“Business lending, mortgage lending and general insurance look set to be the hardest hit.
“Despite warnings from the Bank of England and some high street lenders, the only type of lending that is expected to grow in 2018 is consumer credit.”