The firm has attacked a one-off Financial Services Compensation Scheme charge of £241m – which accounted for more than half of the drop in profits – claiming it was “illogical and unfair”.
The charge covers the group’s share of interest for the full three-year period of the Treasury loan to the FSCS.
Nationwide chief executive Graham Beale says: “We regard the fact that the FSCS charge is not linked to the level of risk posed to the financial system by individual institutions, but instead is allocated by share of the retail savings market, as illogical and unfair, producing a disproportionate outcome for the low risk retail funded institutions, particularly building societies. This view is shared by 173 cross party MPs.
“Our reported profit is 53 per cent lower than it would otherwise have been because there is an exceptional charge of £241m relating to the levies payable to the FSCS.”
Beale adds that low interest rates and the contraction of the mortgage market helped push profits down.
He says: “Profitability has been adversely affected by the low interest rate environment and increased provisions as a result of the current recession.
“The size of the mortgage and savings market has contracted significantly in the year as a result of the extreme economic conditions.”
The firm expects market conditions to remain challenging throughout 2009 and beyond. It believes the low interest rate environment will continue to depress margin and higher levels of unemployment and business failures will inevitably lead to increased loan loss provisions.