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Nationwidesuffers as profits halve

City A.M. Reporter
NATIONWIDE, Britain’s largest building society, said it expected broad stability in the housing market over the next 6-12 months, when posting a near halving of full-year profit yesterday.

House prices have recovered ground in recent months, though they fell in February and April, according to rival lender Halifax, raising questions over the strength of the market. Nationwide said an increase in properties for sale would relieve pressure on prices, while a continuing lack of credit and high prices relative to salaries would act as an upward limit.

Customer-owned Nationwide said it had been hit by the contraction in its core mortgage and savings markets and by pressure on margins. Underlying profit in the year to 4 April almost halved to £212m.

The lender said it saw lower levels of profitability continuing throughout 2010.

It lent £12bn of mortgages over its past financial year, representing a market share of 8.7 per cent, down from nine per cent in 2008-09. Nationwide said it had no “aggressive growth plans” and expected to remain at that level.

The building society, under pressure from weak markets and low interest rates, plans to accelerate cost cuts to hit a targeted cost/income ratio of less than 50 per cent by the end of 2012-13 from a current 61.3 per cent. It will review its distribution network, swollen by recent acquisitions, and administrative buildings. Nationwide has over 1,000 retail outlets. Nationwide has already cut more than £150m of costs over the past three years and shrank its workforce by just under 800 staff to 15,800 over the past year.