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Nationwide looks to raise £500m with new capital instrument

Nationwide is to raise up to £500m through a new form of instrument which allows it to raise core capital without compromising its mutual status.

The building society will issue core capital deferred shares, which chief executive Graham Beale describes as “a natural replacement” for permanent interesting bearing shares.

Building societies’ regulatory capital is primarily made up of retained earnings, which has historically been supplemented by Pibs.

But Pibs no longer qualify as core capital under new regulatory capital requirements.

Beale says: “CCDS will enable Nationwide, and potentially other building societies, to continue to raise core capital without compromising our mutual status or business model.

“As a building society, the main component of our core capital is retained earnings and we do not expect this position to change in the future.

“However, it is important that we continue to have external access to core capital to ensure we can manage our capital base effectively. Nationwide has worked with the regulatory authorities to create this innovative instrument and I am pleased that we are in a position to launch this offering.”

The new shares will be offered to institutional investors over the coming weeks.

Last week Nationwide posted a pre-tax profit of £270m and reported its strongest half-year lending figures for five years.

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