Nationwide announces move into business banking as profits slump

Nationwide has announced that it will launch a business bank account - with or without external competition funding - describing the project as an “opportunity too big to ignore”.

As the only major financial services provider not to currently offer a SME banking proposition, Nationwide said it is aiming to “make a real difference” to a sector it believes is “underserved”, with five big banks holding 85 per cent of business accounts.

The lender said it has now committed to launching a business current account next year that could grow organically over time, even without the funding.

But a submission is to be made to the Incentivised Switching Scheme as a precursor to applying for up to £50 million of funding from the RBS remedies Capability and Innovation Fund so that it can launch a “market-leading, digitally enabled business current account” by the end of 2019.

Nationwide said the funding will ensure that it maximises its potential to enter the market with “a strong and vibrant proposition that will use the Society’s leading service and trust credentials to attract new and existing members”.

The announcement describes an account designed “to meet the straightforward needs of small and micro-businesses combining fair value with Nationwide’s market-leading service levels”. The proposition will also combine innovative digital technology with access to branch service.

Joe Garner, Nationwide’s chief executive, said: “Supporting small businesses with a current account marks an important step for Nationwide – each year around 50,000 of our members ask us if we can help. This opportunity is just too big to ignore, which is why today we are reaffirming our commitment to launch a business bank account proposition.

“Successfully bidding for the Capability and Innovation Fund remains our number one priority – it will accelerate our ability to give our members a fully-fledged business banking service with the associated benefits such as unsecured term lending and credit cards. Without the funding we will still launch our proposition. This option would clearly take much longer to reach maximum potential as it would not initially benefit from the added products and services, incentives and marketing drive we are currently considering. We believe we can make a real difference as our proposition will build on the high levels of service and trust associated with Nationwide.”

The announcement of Nationwide’s new business sector venture comes as the building society also reported half-year profits had slumped as it counted the cost of writedowns and a major technology investment.

Statutory profit in the six months to September 30 fell over 17 per cent to £516 million, which it put down to £135 million of “asset write-offs and incremental technology spend”.

Underlying profits were down by 22 per cent to £460 million.

Mr Garner said: “Our first-half profits were lower than last year because we have chosen to increase our investment in the future of our society. As a mutual, we do not judge our success by profit growth alone, but by how we manage our profits to serve our members’ interests.”

However, Nationwide has grown its personal current accounts by over 40 per cent in the last five years, with Current Account Switching Service data showing that the Society attracted one in every five switchers for the period of April to September 3.

The society said it will showcase the service and trust levels that have fuelled its current account growth to attract businesses, as well as its network of around 650 branches.

As a mutual organisation driven by member needs and not profit, Nationwide said the drive will look to focus on the UK’s 5.6 million smaller and micro businesses - from tradespeople and sole traders to owner-managed businesses. And with more than 95 per cent of UK businesses having fewer than ten employees, Nationwide is counting on such an approach having a wide appeal.

A new team - Nationwide for Business - has been established to create and deliver the new account, in addition to applying for funding.

Mr Garner added: “Small businesses typically do not have complex banking needs, but they do demand and deserve excellent banking products and services as well as fair value. They need a current account that doesn’t take days to open or that levies large fees. They need someone they can contact and trust when they have a problem, and they need to know their banking provider has the scale and stability to be there when they need it.

“Nationwide is the only major financial services provider not to currently offer business banking and it is the only credible alternative that could change the way the market operates. We can do this by offering a fair product that doesn’t discriminate based on the size of a business or its ambitions to grow.”