Nationwide sees locked-down savers squirrel away cash as profits slide

Nationwide Building Society has booked a 40 per cent fall in annual profits after taking a £100m hit from the coronavirus pandemic.

Mutual the Nationwide has hundreds of high street branches throughout the UK. Picture: Greg Macvean

The mutual said that underlying profit before tax dropped to £469m in the year ending 4 April. That compares with £788m the year before. It came on underlying income of just over £3 billion, down about 4 per cent.

The society had already been seeing pressure on its profits from its investment in technology and payouts for payment protection insurance (PPI) before booking a £101m hit from the Covid-19 crisis.

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Chief executive Joe Garner said: “While the coronavirus impacted our profitability in the last few weeks of the year, there was pressure on margins even before it hit. Notwithstanding this, we achieved a great deal during 2019/20. We have record membership and grew the number of people we helped into a home, to save and to manage their money.”

The business has allowed its mortgage holders to apply for payment holidays to help them through the economic downturn.

Garner said that many people will have applied for a holiday out of caution, adding: “Probably the very first people to apply would be those who are really on top of their financial position and we know there are a lot of people who have taken them as a precaution, and will go back to paying in full at the first opportunity.”

Some 280,000 customers have taken a payment holiday with Nationwide, a “vast majority” of which are for mortgages.

The lender, which rescued the Dunfermline Building Society during the financial crisis, has also promised that no-one will lose their home in the next 12 months because of the impact of coronavirus.

The crisis has also enabled people to save more. While some current account holders are struggling, having seen their income reduced, others are able to put more away because they are spending less by staying at home.

“People who are working and are being paid as normal, they’re just able to spend less,” noted Sara Bennison, Nationwide’s chief product and marketing officer. “People have very front of mind now about why it’s important to save.”

While the residential property market has taken a hit, it is starting to show signs of stabilising, Nationwide added.

Chief financial officer Chris Rhodes said: “Nationwide ended 2019/20 in a position of financial strength, able to support its members whilst continuing to invest for the future.

“We ended the year with a strong capital position with a UK leverage ratio of 4.7 per cent, above our target of at least 4.5 per cent.

“Underlying profit of £469m reflected lower income, our technology investment, higher PPI provisions, and a £101m financial impact from an increase in expected credit losses.

“In the medium-term the society will focus on maintaining its strong capital and liquidity position.”

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