Nationwide cashes in as profits rise by 30%

Britain's biggest building society sees profits rise to £276m as it focuses on attracting savers

by Elizabeth Anderson
Last Updated: 22 Nov 2011
There hasn't been much good news emanating from the banking sector lately - most recently, Moody's warned this week that some UK lenders may have their credit ratings downgraded. But at least the latest results from Nationwide provide some cause for optimism. Britain’s biggest building society said it had a ‘strong and profitable’ financial year, reporting a 30% rise in underlying profit to £276m.  This was mainly due to lower bad debt charges (the amount written off for customers who can’t pay back their loans), which fell by a third to £359m.

Nationwide also had some good news for shareholders about PPI payouts - at least relative to the competition. Earlier this month, banks were forced to pay out billions of pounds to customers wrongly sold payment protection insurance. Lloyds had to put aside £3.2bn in compensation, and Barclays and RBS nearly £1bn, so Nationwide’s £16m hit was pretty small in comparison. 'Our own provision for customer redress, with a charge for the year of £16 million, compares very favourably with the several billions announced by the banks during the past month,' said chief exec Graham Beale, a bit smugly.

Nationwide has had a good few years. It weathered the financial crisis much better than most of its larger rivals, positioning itself successfully as a safe haven for those scarred by their experiences with Northern Rock et al.It’s focused on attracting savers ever since, helped by mergers which included the takeover of Derbyshire and Cheshire building societies in 2008.  Today’s results shows the trend is continuing as it focuses on offering higher savings rates: retail savings grew by £1.6bn last year.

Nationwide also seems top be taking a sensibly cautious approach to lending, which has included reducing its exposure to the housing market: residential mortgage lending fell to £124.7m from £127.5m in 2010. It reckons the market remains ‘subdued’ and faces more challenges this year from flat economic growth and the consumer spending squeeze.

So it seems to have been a successful year for Nationwide, as it continues its cautious approach to lending and focuses on attracting savers. If the rest of our lenders had stuck to a similar approach over the last decade, we might not be in this mess.

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