Nationwide issues ‘bad loans’ alarm despite profit rise
NATIONWIDE has warned that bad loans are likely to rise as the economic outlook darkens and British households feel the squeeze.
The country’s second biggest mortgage lender issued the warning as it posted a jump in profits on the back of rising interest rates.
Pre-tax profits at Nationwide climbed by 13pc to £969m in the first half of its financial year. However, its provisions for bad loans rose to £108m, compared with just £34m during the same period last year.
Robert Gardner, the building society’s chief economist, said: “Household budgets are under significant pressure, consumer confidence is low and borrowing costs are higher than they were at the start of the year as well.”
The lender said it has yet to see rising arrears but a jump is likely as inflation continues to put pressure on household budgets.
The results highlight the impact of the turbulent economic environment as interest rate rises aimed at taming inflation have the effect of boosting banks’ profits while at the same time hitting home owners through higher mortgage payments.
It comes just a day after the Office for Budget Responsi- bility (OBR) warned that households face the biggest fall in living standards since records began following Jeremy Hunt’s tax-raising Autumn Statement.
The OBR also said that house prices are set to fall by nearly a tenth by 2024, while ratings agency S&P has sin- gled out Britain as one of the markets in Europe showing the early signs of a property slump.
Nationwide also revealed that it lent £400m to its pension fund last month amid the gilt market turmoil brought about by Kwasi Kwarteng’s mini-budget.
Debbie Crosbie, the building society’s chief executive, said: “Nationwide is not immune to the current economic challenges and it’s important to maintain finan- cial strength.
“Our strategy is focused on growing the membership base, increasing value to members, and becoming simpler and more efficient in the way we operate.”
Ms Crosbie, the former TSB boss who took over as head at Nationwide in June, added that it remained “fully committed to helping people into a home, continuing to lend particularly when others recently withdrew products”.