NATIONWIDE, Britain’s largest building society, reported a 69 per cent drop in full-year pre-tax profits yesterday, blaming the decline on the costs of the government’s deposit protection scheme for savers.
The mortgage provider and lender offered little sign of optimism in its outlook, warning of further loan loss provisions to come.The group said it was braced for a rise in bad debt provisions, claiming low interest rates had depressed margins and said it expects a significantly reduced level of underlying profit, seen in the second half of the last financial year, to continue.
“Market conditions will remain challenging throughout 2009 and beyond,” chief executive Graham Beale said.
Analysts said the lender’s 12 per cent drop in margins in the second half and bleak outlook point to a worrying trend for the sector as a whole.
“That Nationwide can be flagging a potential decline in profits towards zero – or even losses – in the next 12 months is clearly bad news for the UK domestic banks,” said analysts at Credit Suisse.
The lender’s statutory pre-tax profit, which includes an exceptional charge of £241m to cover its contributions to Britain’s depositor protection scheme, came in at £212m, 69 per cent lower than last year.
The mutual said the government levies accounted for more than half of the fall in its reported profit
Stripping out exceptionals, the society’s underlying profit before tax fell 49.7 per cent to £393m, it said.