The UK’s largest mutual posted underlying profits of £117m, down from £322m in H1 2008. Chairman Graham Beale has blamed the slump on continuing low interest rates combined with a slump in commercial property prices.
The Group achieved an estimated 8.3 per cent share of the gross residential mortgage market, writing new business with an average loan to value of 63%. Nationwide’s retail funding balances reduced by £5.6bn to £122.7bn, reflecting what it says is an “intense competition and uneconomic pricing within a distorted competitive landscape for retail savings”. It remains the third largest UK mortgage provider and second largest savings provider.
Nationwide’s mortgage book three-month arrears rose slightly to 0.66 per cent, but loan impairments fell slightly from £320m in April 2009 to £317m in September.
Beale says: “Looking ahead, we expect the remainder of this year and next to present a very difficult trading environment. Economic recovery is forecast to be slow and we expect interest rates to remain at their current level until at least the fourth quarter of 2010.”
Nationwide also warned against the current rise in house prices, reported in part by its own House Price Index. It says the rise appears to be driven by lack of supply, and growth in unemployment throughout 2010 will inevitably exert downward pressure on house prices.
Beale also criticised the recent raft of proposals put forward by the tripartite to fix the banking sector. He says: “We remain concerned that some of the changes could undermine the future of the building society sector which the Government has said it wants to protect. We also continue to lobby the Tripartite authorities to review the way in which Financial Services Compensation Scheme levies are allocated across the industry to ensure that low risk organisations like Nationwide are not unfairly disadvantaged by the basis of allocation which does not recognise the level of risk which individual organisations pose to the system.”