Nationwide fears low rate impact as profits fall by almost a half

Published on Wednesday 26 May 2010 20:36

NATIONWIDE Building Society yesterday warned that historic low interest rates would hit profits in the year ahead as the spectre of further job losses hangs over the lender.

Profits for the year to 4 April slumped 46 per cent to 212 million, with the society saying customers lingering on its low mortgage rate were costing it more than 450m a year.

The UK's biggest building society – which rescued Dunfermline Building Society last year in a UK government-backed deal – said it was taking tough action on costs to help limit profit declines, including possible cuts in its 20 regional centres. It is understood its base on the outskirts of Dunfermline is unlikely to be affected.

Nationwide said its headcount had been reduced by between 700 and 800 over the past year, but emphasised that the figure included posts that had not been replaced when staff resigned as well as cuts.

In Scotland, the group's staffing levels fell by 40, to 900. None of the 77 branches was closed, although 12 outlets south of the Border were axed.

Nationwide has already cut more than 150m of costs over the past three years, shrinking its workforce to 15,800.

Chief executive Graham Beale declined to comment on further job cuts and said the review under way would take "years not months".

The company's full-year accounts revealed Nationwide spent 62m rescuing Dunfermline's core business.

But the cost was partially offset by a 40m rise in the value of Dunfermline's social housing portfolio since the second part of the takeover in June.

In welcome news for the housing market, Nationwide said it expected property prices to remain stable over the next year, with any "major dip" unlikely.

Commenting on Europe's debt crisis, Nationwide said: "We have no direct sovereign exposure to Greece, Ireland, Italy, Portugal and Spain."

But Beale warned that the ongoing sovereign debt crisis could have an impact on interbank interest rates and push up the price of fixed mortgages. He said the group was not planning to raise prices yet, but said "ultimately it will impact on the consumer" if eurozone fears and market uncertainty did not recede.

Nationwide has just launched a new television advertising campaign fronted by characters from comedy show Little Britain as it seeks to distance itself from high street rivals by highlighting its mutual status.

The group is also embarking on a push to diversify away from hard-hit mortgage and savings markets, focusing on current accounts. It plans to launch a new internet bank offering and suite of current accounts in 2011.