Nationwide profits up after cost cuts

NATIONWIDE Building Society’s profits rose 26 per cent to £147m in the first half of 2010, from £117m the previous year, as it cut costs and reduced loan impairment charges.

Pre-tax profits rose 83 per cent to £259m in the six months to 30 September 2010, from £143m in the same period in 2009.

Impairment charges on loans and advances to customers fell 44 per cent to £179m from £317m a year earlier, while bad commercial property loans fell 47 per cent to £95m.

But the group has admitted the current low interest rates have hit margins and honouring its low mortgage rate cost it £300m in the past six months compared to other market rates.

Chief executive Graham Beale said “the majority” of its existing mortgage customers are still on a rate capped at two per cent above the Bank of England base rate.

Nationwide said it continued to lend despite a weak mortgage market, achieving an 8.5 per cent market share and gross residential mortgage lending of £6bn.

And it reported a significant recovery in savings deposits, with £400m in net retail deposits compared to £6.1b outflows the previous year. It also diversified its income base into non-mortgage and savings products.

It opened 260,000 new current accounts and 120,000 new credit card accounts in the first half, 61 per cent up from last year and 88 per cent up on the one before.

Meanwhile Nationwide’s cost cutting drive has seen it close its network of agency offices and a number of branches.

Beale said customer demand for equity-linked alternatives to traditional savings products, plus innovative products, drove a 14 per cent increase in sales of investment and protection products and an overall increase in non-interest income of more than 20 per cent.

“These results... demonstrate both the resilience of our business model and the strength of our customer franchise,” he said.