Nationwide’s profit jumped in 2023 as the building society became the latest firm to benefit from higher interest rates.
The building society’s pretax profit climbed nearly 40 per cent to £2.2bn from £1.6bn last year despite a slight increase in costs.
Nationwide’s net interest margin, the difference between what it pays out and receives in interest payments, widened to 1.57 per cent from 1.26 per cent last year leading to a near £1bn increase in net interest income.
As a result of the higher profit, Nationwide declared its first ‘Fairer Share Payment’. Eligible members will receive £100 into their current account in June, representing a £340m distribution in total. It intends to make the payment every year so long as it would not be detrimental to its financial strength.
The building society also launched the ‘Fairer Share Bond’ which it says has a “competitive interest rate” for existing members
Across the year Nationwide said the financial benefit to members has increased to over £1bn, up from £325m last year.
It said this was “supported by our competitive mortgage and savings products; as we have passed a greater proportion of interest rate rises to savers than the market average.”
Reflecting the higher rates, its share of the deposit market grew to 9.6 per cent, up from 9.4 per cent last year, equalling a balance growth of £9.1bn.
Chief executive Debbie Crosbie said: “We can do this because we’re a building society, not a bank, and our profit is reinvested for our members’ benefit.”
Nationwide was among a number of banks and building societies targeted by MPs for offering “measly” interest rates on savings accounts.
According to the Treasury Committee, Nationwide offers 1.25 per cent on its everyday savers account. While this is comfortably higher than rivals, it is significantly lower than the current 4.5 per cent base rate.
Provisions for bad loans rose to £126m in the year, compared to a release of £27m last year. However, Nationwide said the credit quality of its portfolio remain strong with “low levels of arrears”.
Nationwide noted that the deteriorating macroeconomic outlook as well as expected increase in arrears is reflected in its calculations for the provisions.
Yesterday. figures showed that arrears had continued to tick up in the first quarter of this year as borrowers increasingly felt the strain from higher interest rates.
Crosbie noted that the transition to higher interest rates would be a strain for many households. “Nationwide remains well positioned to use its financial strength to continue to support its customers through the challenges ahead,” she said.