THE EUROZONE crisis is forcing up the cost of UK retail deposits, the chief executive of Nationwide warned yesterday as the lending giant reported a rise in profits.
Graham Beale said the added funding costs would be felt for as long as the single currency remained mired in a sovereign debt problem.
“Whilst the initial impact of this has been felt in the wholesale markets, there has been a consequent increase in the cost of retail funding, with greater competition in a savings market which is growing only slowly by historical standards.”
Beale also warned British public and household spending are being “constrained” by austerity measures. He said a further recession could not be ruled out but predicted the domestic recovery would continue “at a modest pace”.
He spoke out as Nationwide, Britain’s biggest customer-owned financial services group, reported higher underlying interim profits. Underlying pre-tax profit for the six months ending September rose 17 per cent from a year ago to £172m while the statutory pre-tax figure dropped eight per cent to £238m.
Total income inched up 3.3 per cent to £1.006bn.
The group has no direct exposure to the troubled Eurozone nations of Portugal, Italy, Greece, Ireland and Spain but said it has cut its exposure to these countries’ markets, by 18 per cent, to £1.9bn.
Much of that figure comes from a £1.16bn exposure to Spain while Nationwide said it has only £2m in Greece.
It also said gross lending rose 48 per cent over the period to £8.9bn, including £1.2bn which went to first-time buyers, up three per cent from the same period last year.
The firm also said it expects British interest rates to remain on hold for an extended period, with any increase not expected until 2013.