Building society Nationwide’s annual profit nearly halved it said today as it warned of rising loan losses due to the coronavirus pandemic.
The lender also said it was abandoning some of its member benefit targets in response to the crisis.
Nationwide booked a £101m hit from expected credit losses and said it will focus on maintaining capital reserves after profit for the year to 4 April fell 44 per cent to £466m.
The mortgage lender said profit had been under pressure before the pandemic, owing to margin erosion from tough competition in the mortgage market, but the outbreak had caused it to ditch some annual targets.
Among these is its goal of delivering more than £400m in financial benefits to customers through better pricing on the likes of savings deposits, adding that paying significantly better rates to savers has become unsustainable after the Bank of England cut the base rate to 0.1 per cent.
“In the last 10 years we have built our capital strength significantly and we will use our financial strength to support our members through the difficult times ahead,” said chief executive Joe Garner.
Unlike the big shareholder-owned banks that are its main rivals, Nationwide – as a member-owned society – is not under pressure to deliver ever greater returns to shareholders.
Nationwide reported a core capital buffer of 31.9 per cent, down slightly from 32.2 per cent the previous year but still ahead of most major rivals.
In April, Nationwide scrapped plans to enter the business banking market, blaming coronavirus for making it commercially unviable.
The building society said it will return a £50m grant from a pool of RBS cash to foster competition among British banks as it scales back ambitions in the face of the outbreak.
Nationwide said it expected its sudden U-turn to cost it £70m. But it said it plans to redeploy staff working on its scrapped business banking debut.