News Column

Nationwide profits soar as lending drops

August 19, 2014

Patrick Collinson, theguardian.com



Profits at Nationwide building society soared by 141% in the three months from April to June 2014 despite a one-third drop in lending to homebuyers due in part to a regulatory crackdown on mortgages.

The society said its first-quarter profits jumped from 105m to 253m, boosted by an increase in current account customers switching from other banks, and higher deposits by members.

But the rise comes despite a steep fall in lending volumes. During the quarter, the society lent a total of 5.8bn, down from 6.4bn compared to the same quarter last year. Net lending which paints a truer picture as it strips out the effect of people paying off their loans or simply remortgaging was down even more, falling from 2.6bn to 1.7bn.

Nationwide is the biggest lender to first-time buyers in the UK, accounting for around one in six loans in the sector.

The figures will add to the debate over the impact of the Financial Conduct Authority's Mortgage Market Review, which came into force during the period. It compels lenders to make more stringent affordability checks before granting loans, and is widely credited with forcing a slowdown in lending. However, industry insiders believe volumes will recover once lenders become more familiar with handling affordablity checks.

Nationwide said that although the review had some impact, its mortgage volumes reflected an exceptional quarter last year, when few other lenders were in the market.

The society is powering ahead in the current account market, opening 110,000 new accounts during the period, taking its market share from 6.2% to 6.4%. Some of the customers joining Nationwide were former Co-operative Bank customers seeking a mutual alternative to the troubled bank, although Nationwide said it had success with former customers from every bank, obtaining a 10% share of the "switching"market.

Deposits by members rose by 1.5bn to 132bn, helping the society to increase its core capital strength measures. Its key ratio, CET1, rose to 16.3% from 14.5%, which is substantially above the minimum required. The improvement comes partly from the society's continuing reduction in commercial loan balances, and no extra provisions for compensation such as PPI (payment protection insurance).

Graham Beale, Nationwide's chief executive, said: "Nationwide has continued to help members to save, buy their own homes and manage their money in a way that suits their needs. As a result, member deposits increased by 1.5bn, we grew our share of current accounts to 6.4% and we supported the housing market, helping over 23,000 people to buy their home, with gross mortgage lending of 5.8bn.

"In line with our focus on customer service we have sustained our position as number one for customer service satisfaction, where our lead over our high street peer group has increased over this period."


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Source: Guardian Web


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