Nationwide stands tall with new mutual-friendly capital plan

Against the backdrop of the troubles of the Co-op Bank and the scandal of the Crystal Methodist, British mutual Nationwide has announced that it's pressing on with issuing a new kind of share called "core capital deferred shares" (CCDS).

The lender has detailed its plan to issue up to £500m of the CCDS, which will enable it "to continue to raise core capital without compromising our mutual status or business model", said chief executive Graham Beale. Investors buying the shares will only be able to vote once, regardless of the amount they invest, just like all other members of the mutual.

CCDS are, added Beale, "a natural replacement for Permanent Interest Bearing Shares (PIBS)" and, although the capital will be expensive for the building society, they could provide an example of an effective capital instrument for other mutuals.

As of 30 September of this year, Nationwide already had a fully-loaded Basel III core tier one capital ratio of 11 per cent - one of the strongest ratios amongst major UK institutions, it reported.

It commented that its "very positive" performance in the first half of 2013/14 will be complemented by the implementation of the plan: "CCDS issuance will contribute to the sustainability of our business and will strengthen our ability to act as a compelling alternative to the banks." It also expects to do well over the rest of the financial year.

Beale continued:

As a building society, the main component of our core capital is retained earnings and we do not expect this position to change in the future. However, it is important that we continue to have external access to core capital to ensure we can manage our capital base effectively.