Low interest rates hit Nationwide profits

The mutual posted statutory profit for the six months to September of £696 million, down from £802 million year-on-year as it also announced that it was also walking away from the commercial property sector.

Underlying profit was reported at £615 million, down from £801 million.

However, net mortgage lending performance was its “best ever”, rising by 17 per cent to £17.5 billion and the company said net mortgage lending of £6 billion, up 46 per cent, was also its best ever.

Meanwhile, current account customers were also attracted in record numbers, with 377,000 people opening an account in the half year period, a jump of 36 per cent.

Nationwide chief executive Joe Garner, said: “We have taken the conscious decision to stand by our members, continuing to help them by reducing variable mortgage rates and offering long-term value to savers, even in the current low interest rate environment.

“As expected these conscious decisions and those taken in recent years have had a knock-on impact on our profits.

“However, overall the society said it had achieved “strong trading and a good financial performance over the first half of the year.”

The Nationwide said that the UK’s vote to leave the EU was creating uncertainty, but it had set up a Brexit Consumer Support Panel, which it said would bring together consumer industry organisations to try to address the challenges facing consumers.

The panel will provide insights to the government into consumer attitudes and behaviours in relation to Brexit and promote consumer interests.

On its outlook for the housing market, Nationwide reported a modest slowdown in activity since the UK’s Brexit vote, but said demand and supply are well matched.

Nationwide also said that while uncertainty in the economy may soften demand, “prices will continue to be supported by low interest rates and limited supply of new homes”.

However, included in Nationwide’s statement accompanying its latest results was the announcement that it was closing its Commercial Real Estate (CRE) business after the outlook for the property sector darkened following the vote to leave the European Union.

Nationwide said the CRE business, which accounts for 2.7 billion pounds ($3.35 billion) or around 1 percent of its assets, was no longer key to its strategy and that it had been scaling back the operation before June’s Brexit vote.

“Since the EU referendum expectations for commercial property values have moderated and most forecasts are predicting modest falls,” Nationwide said. The business which is closing focused largely on lending to low-risk property in Britain.