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Economy

Nationwide announces profits

Written by Gary Howes

Monday, 10 November 2008

Half year results for Nationwide Building Society show robust reaction to financial market chaos.

Nationwide Building Society (LON:POB) today announced its results for the half year ended 30 September 2008.

This set of results shows a strong and resilient performance in an exceptionally turbulent market place.

This despite mortgage lending falling 72% in the fiscal first half as it funded loans from customer deposits as capital markets worsened.

Nationwide said they were strong and well placed compared to competitors, with a Tier 1 ratio of 10.0% and a high quality balance sheet.

This half year has seen consumers make a flight to safety as they recognise the strength of Nationwide, helping the Society attract £2.6 billion of net receipts - an estimated market share of 34%.

Nationwide gets almost 70% of funding from deposits and is less dependent than most peers on capital markets to support mortgage lending.

The Building Society announced a profit before tax up 11% at £374 million (30 September 2007: £338 million).

Underlying profit before tax, which excludes merger costs and fair value gains on derivatives and hedge accounting, of £322 million (30 September 2007: £394 million). This decline primarily reflects a prudent decision to hold significantly higher levels of high grade liquidity and an increase in the cost of retail funding.

Nationwide's chief executive, Graham Beale, said:

"Nationwide has delivered a solid performance in a difficult market with pre-tax profit increasing by 11% to £374 million. Our resilience proves that the building society business model can be particularly effective during turbulent market conditions in providing both security and good value to members.

"Our capital ratios have improved with our total Tier 1 ratio increasing to 10.0%, which is one of the strongest in the banking sector. Our asset quality remains strong reflecting our longstanding conservative approach to lending, which is to focus on quality rather than chasing market share.

"We continue to manage our business prudently in response to market conditions and to maintain our relatively low exposure to wholesale market risks. We estimate that we have taken 34% of UK net retail deposits in the period, and net lending was more than covered by retail inflows."