Nationwide profits slashed as competition remains fierce on the high street

Joe Garner

The UK’s largest mutual reported a 19 per cent drop in underlying pre-tax profits to £788 million for the year to April 4 – its third straight year of falling annual earnings.

It said profits were impacted by a £227 million charge for technology asset write-offs and its IT investment programme, following its announcement last year to spend £1.3 billion over five years.

On a statutory basis, pre-tax profits fell to £833 million from £977 million the previous year.

Despite the margin squeeze, Nationwide increased the size of its loanbook, with net new mortgage lending of £8.6bn almost 50 per cent higher than the previous year, and its market share up to 18.7 per cent from 13.2 per cent.

Member savings deposits increased to £6bn from £3.5bn.

Chief executive Joe Garner said it took the profit knock to put member interests first, but delivered above-target financial benefits to its membership base of £705 million.

He said: “During the year, we also announced a significant boost in our technology investment over five years to ensure we continue to excel on service.

“These were conscious decisions we were able to make as a building society.

“As we expected, they have had an impact on profits in the short term, but these choices are in the long-term interests of our members.”

However, the group’s net interest margin – a key performance measure for retail banks – fell to 1.22 per cent due to “sustained market competition” and fewer borrowers on the standard variable rate.

Looking ahead, Mr Garner said that “we expect our core mortgage and savings market to remain competitive, with a continued narrowing of our net interest margin”.

He added that demand in the housing market would remain “fairly subdued”.