Lender’s profits hit by tech spending

Nationwide reported a 21 per cent drop for period

BRITAIN’S BELLWETHER mortgage lender, Nationwide Building Society, reported a 21 per cent fall in profits for the first nine months of the year after ramping up its investment in digital banking.

The lender is investing to make sure its systems can cope with more customers. Unlike rival listed banks such as Lloyds and Barclays, the company is not under pressure to deliver ever higher profits as it operates as a society owned by its customers.

Deputy chief executive Tony Prestedge said Nationwide is building up its business banking capabilities and providing better and simpler digital services.

The mutual reported statutory profits of £703m for the nine months to December, compared with £886m in the same period a year earlier. It booked a £167m charge for technology investment.

Underlying profits were down by 21 per cent to £691m.

Nationwide’s chief executive Joe Garner said: “The technology investment programme is around £1.3bn in magnitude. We are still at the early stages of the cash spend.

“In September, we took the conscious decision to increase significantly our investment in the society in the full knowledge that it would impact profitability in the short to medium-term but would be of long-term benefit to our members.” He said the investment will ensure it can meet members’ changing needs in an increasingly digital future.

“At the same time, consistent with member feedback, we remain committed to and are investing in our presence on the high street,” he added.

The building society said the cash injection would help “simplify its technology estate and build new technology platforms to enable growth and diversification, and drive forward digital, data and analytic strategies”.

Nationwide is the third largest provider of home loans in Britain with a market share of around 13 per cent. It said it expects its retail lending margins to continue to shrink.

The firm’s net interest margin – a closely-watched measure of underlying lender profitability – fell to 1.26 per cent, compared with 1.33 per cent a year ago, amid intense competition in the home loans market as lenders reduce the price of mortgage borrowing.

Nationwide has said it is comfortable keeping annual profits at between £900,000 and £1.3bn per year.