Nationwide marks turnaround with 54% profit increase
Nationwide Build Society posted £1 billion in profits for the year to April.
Nationwide Building Society has recorded a 54 per cent rise in annual profits, barely two years after the lender faced a £1 billion black hole in its finances.
The building society, one of the last in the UK to retain the mutual model where it is owned by customers rather than shareholders, said pre-tax profits for the year to April climbed to £1.04 billion.
It is a marked turnaround from 2013, when Nationwide came under fire after the Bank of England revealed a £1 billion black hole in its capital buffer. The Bank's Prudential Regulation Authority ordered the UK’s eight biggest lenders to raise £13.4 billion to fill a £27.1 billion shortfall in their finances.
At the same time, Nationwide faced intense criticism over a £2.26 million pay package for chief executive Graham Beale. A year before it was criticised after 700,000 customers had payments taken from their accounts twice by mistake.
Delivering its annual results on Friday (22 May), Nationwide confirmed its status as Britain’s second-largest mortgage provider with a market share of 13.4 per cent, although this was down from 14.9 per cent the year before. Net mortgage lending fell to £7.1 billion from £9.9 billion.
It also increased its share of current accounts, benefitting from the UK’s new switching service. Nationwide won an average of 8.4 per cent of account switches.
Net interest income - the revenue from savings deposits and investments - rose £458 million to £2.8 billion. Savings deposits were up £1.9 billion in spite of low interest rates.
Profitability rose, as net interest margin, which is the difference between the building society’s income from lending and its cost of funding, widened to 1.46 per cent from 1.25 per cent.
Nationwide also said Mr Beale would retire next year after nine years as chief executive.
He said: "Nationwide is in great shape and is demonstrating how a mutual building society can make a real and refreshing difference in the financial services sector.
"Succession of leadership is best dealt with from a position of strength and hence the time has come for the society to identify and appoint its next chief executive. In the meantime, there is lots to do and there are exciting opportunities ahead, so it is very much business as usual."