Nationwide profits slip for second year running after planned mortgage retreat

Nationwide, Britain’s biggest building society, today announced a slump in mortgage lending amid concerns of a “fiercely competitive market”.

Net lending fell from £8.8bn to £5.8bn in the year to 4 April. Annual profit slipped seven per cent to £977m

A planned retreat from the buy-to-let mortgage market was the driving force behind falling lending, Nationwide said.

The lender is planning to launch a business banking mutual alternative if it could get its hands on a government grant.

UK lenders have been hit by shrinking mortgage margins after being hit by sluggish growth in the housing market and keen pricing from the likes of HSBC.

A second year of declining profits was not only due to a tricky mortgage market – whose woes are compounded by continued low interest rates – but also owing to the firm buying back its own debt.

“Nationwide continues to trade strongly in spite of intense competition in our core markets, in a number of cases choosing to protect value for members through more competitive pricing rather than taking the opportunity to enhance margin,” said finance chief Mark Rennison.

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Record-high

Membership of Nationwide, a mutual organisation, hit a record-high of 15.5m. Chief executive Joe Garner said Nationwide had its best-ever year for current accounts.

As part of Royal Bank of Scotland’s measures to appease European regulators, the state-backed bank must set aside money to increase competition.

Garner said Nationwide had made an application to get its hands on some of this money.

“If we are successful in our application for funding from the money the government … we intend to roll out a mutual business alternative to the big five banks,” he said.