Nationwide says it has a plan to fill capital hole

Tim Wallace
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THE NATIONWIDE yesterday insisted it will fill its capital hole over the coming months, and does not need to issue new capital instruments to hit regulators’ leverage targets.

It came after frenzied speculation that the building society has plans to raise up to £1.5bn with core capital deferred share issuance.

The lender aims to fill the £400m capital hole identified by the Bank of England’s prudential regulation authority (PRA) by the end of the year, largely by retaining earnings. Its leverage ratio of two per cent is below the three per cent required by 2019.

The leverage ratio measures capital against total loans, not adjusted for their supposed riskiness, and some bankers argue it penalises low-risk, high volume businesses like mortgage lending. Nationwide is the UK’s third-biggest home loans provider.

But it insists it has a plan to reach that level without cutting lending. However the PRA last week noted the building society needs to hit that target, without giving any deadline.

But the mutual denied plans for a fundraising round.

“We are absolutely confident we have plans in place to reach the three per cent leverage ratio,” said a spokesperson.

“We will work with the regulator to ensure we work to a mutually agreeable timeframe. There is no need for us to raise funds urgently or otherwise.”