Nationwide profits rise 17% despite 40% decline in lending

by Gill Montia

Story link: Nationwide profits rise 17% despite 40% decline in lending

Nationwide, the UK’s largest building society, has reported that new mortgage lending dropped by 40% in the twelve months to the beginning of April, to £6.7 billion.

Despite this dramatic fall, underlying pre-tax profits rose 17% to £781.1 million

The year saw customer deposits increase threefold, to £9.1 billion, as worried savers transferred cash from Northern Rock and other banks tipped to have a stormy passage through the credit crisis.

The mutual’s share of the savings market increased to 19% leaving it in the enviable position of being able to fund its lending entirely through retail deposits.

In addition, Nationwide’s policy of focusing on low-risk borrowers paid off, taking the lender’s mortgage arrears to below one third of the industry average.

However, its share of the new mortgage market shrank to 7.1%, compared to 11% in the previous 12 months.

Nationwide has had no direct exposure to US sub-prime mortgages although disruption of the markets during the credit crisis has cost it £102.2 million so far.