NATIONWIDE building society shrugged off a “choppy” housing market last year amid the uncertainty of the Scottish independence vote and run up to the general election to boost underlying profits by a third to £1.2 billion.
The results came as the mutual said yesterday that it believed 2015 would be more stable, but warned of possible consumer concerns about a potential exit by the UK from the European Union weighing on sentiment in the mortgage market.
Our plan is to keep branch numbers constant over the next few yearsChris Rhodes
Nationwide chief executive Graham Beale, who it was revealed would retire in summer 2016 after nine years at the helm, said the group’s solid progress in 2014 came despite “all sorts of competing tensions”.
He cited the Scottish referendum and the opposition Labour party’s threat to introduce a tax on higher-value properties.
“The uncertainty of the general election and some of the political direction, particularly from the Labour party – the notion of the mansion tax – it was clearly influencing and dampening sentiment ahead of the election,” Beale said.
He added: “My expectation is that it will be a stronger market this year than last year. Provided that borrowers don’t start to get concerned about the EU referendum [by end-2017], generally it’s a more stable environment.”
Nationwide said the search for Beale’s successor would include internal and external candidates.
Chris Rhodes, Nationwide’s group retail director, said the potential knock-on effect of a “Brexit” from the EU could be more damaging to consumer sentiment than the Scottish referendum.
“It’s got to be,” Rhodes told The Scotsman. “It’s all about the unknown and what might happen. Consumers and businesses want stability. People look at their own lifestyles. They want to know if they will still have a job, will they get a pay rise, etc.”
The group’s net mortgage lending – new home loans advanced minus those repaid in full – fell to £7.1bn in the financial year to 4 April from £9.9bn in the previous 12 months. The society has a 31.2 per cent market share.
The lender’s personal current account market share rose to 6.8 per cent and it is targeting 10 per cent. It said its core tier 1 ratio, the financial cushion that backs its loanbook, rose to 19.8 per cent from 14.5 per cent, higher than any major UK bank.
Rhodes said he believed there would be “small increases” in housing volumes over 2015 and 2016, with the shortage of supply helping to underpin prices. “We need to build 200,000 [homes] a year, and we are only building 100,000,” he said.
As the UK is in its sixth year of base rates at just 0.5 per cent following the financial industry crash, Rhodes said the mutual “totally understood” savers’ frustration at earning little on their deposits.
“Our customers are our members. It’s arguably tougher for us than anyone else,” he added. Despite the low interest rate environment, the group’s savings deposits grew by £1.9bn.
Nationwide revealed that it plans to spend £500m over the next five years on modernising its near-700 strong UK branch network.
Rhodes said this was despite a flourishing digital customer base of 2.3 million. “[Branches] are a comfort blanket.
“If something goes wrong you like somewhere to go to get it fixed. We are also human, people like conversation. Our plan is to keep branch numbers constant over the next few years.”