NATIONWIDE, the UK’s biggest building society, has given the strongest indication yet that it will bid for the 316 branches being sold by Royal Bank of Scotland.
Graham Beale, Nationwide’s chief executive, said the option was on the table to help speed up its planned move into small business lending.
Its interest in the RBS assets came as the mutual posted a 17 per cent fall in underlying interim pre-tax profits to £151 million following a further £45m hit for payment protection insurance (PPI) mis-selling.
Beale said: “Strategically, we want to enter into the SME [small and medium sized enterprises] space. If there’s anything that I could do that would accelerate our strategy it would be of interest. Within that context, RBS is something which we will watch very carefully.”
Nationwide said in a statement: “We plan to begin lending to SMEs in 2014, bringing our values and standards as a mutual to a market that is crucial to the UK economy.
“Our plans are progressing well, and we are building the team and infrastructure we need to implement a strong and compelling offering in this sector.”
A £1.65 billion deal to sell the RBS branches collapsed last month after Santander UK said carving out the business from the Scottish bank had been tougher than anticipated. RBS was ordered to sell the assets by the European Commission in return for its £45bn taxpayer bailout in 2008.
It was widely thought that significant IT challenges associated with the transfer of the branches and supporting systems to Santander contributed to the deal’s collapse.
Signalling that a bid approach to RBS was uncertain, Beale added: “There are clearly some enormous complexities there, otherwise that deal would have been done. We need to understand just what those issues are before we can be committal on the point.”
Nationwide’s profit for the six months to end-September was down on the £181m made in the same period of 2011 as bad debts on commercial property lending made before the credit crunch surged to £193m from £72m.
The further PPI hit took the total amount earmarked by the group for one of the UK’s biggest mis-selling scandals to £173m. Nationwide said said its mortgage lending soared to a four‑year high as the Bank of England’s £80 billion Funding-for-Lending scheme helped reduce rates for borrowers.
The group saw gross mortgage lending lifted 15 per cent to £10.2bn, with loans to first-time buyers nearly doubling.
“We have continued to demonstrate that we are on the side of first-time buyers by doubling our lending to this vital sector of the housing market and helping almost 20,000 borrowers into a home of their own,” Beale said.
Nationwide, which was the biggest building society to resist a change of status to a stock exchange business in the 1990s, also revealed yesterday that it had made a £15m loss on derivatives contracts and hedge accounting in the latest trading period.
Its net interest margin – the difference between the higher interest due on loans and the lower interest paid on deposits – rose to 0.93 per cent from 0.81 per cent.