Employee Engagement

Nationwide has seen profits slip 13 per cent as it grapples with low interest rates and its decision to pass on the base rate cut to its members.

The building society said statutory pre-tax profits hit £696 million in the six months to September 30, down from £802 million over the same period last year.

However, it said trading was “strong” for the half-year, with gross mortgage lending jumping 17 per cent to £17.5 million.

Chief executive Joe Garner, who took the top job in April, said: “We have made a number of pledges to help our savers and borrowers.

“These include protecting selected savings rates to minimise the impact of the base rate change and helping our members with variable rate mortgages by passing on the base rate decrease in full.

“These conscious decisions and those taken over recent years have contributed to a reduction in profits in the first half of the year in line with expectations, demonstrating our commitment to putting members’ interests at the heart of everything we do.”

Net mortgage lending notched up its “best ever” performance, rising 46 per cent to £6 billion over the period, while the number of current accounts opened climbed 36 per cent to a record high of 377,000.

However, total underlying income also edged lower, dropping 2 per cent to £1.642 billion for the half year from £1.683 billion in 2015.

On Brexit, it said demand and supply in the housing market was “well-matched”, but there had been a modest slowdown in activity since the EU referendum on June 23.

It said the “less certain economic outlook may soften demand but prices will continue to be supported by low interest rates and limited supply of new homes”.

The Bank of England kept interest rates on hold at 0.25 per cent in November after cutting them from 0.5 per cent in August.

The group’s net interest margin – the measure of the difference between the income it gains from interest and the amount of interest it pays out – dropped to 1.33 per cent from 1.58 per cent.

Asked whether he expects uncertainty to ramp up as Britain pushes ahead with Brexit negotiations, Mr Garner said: “We haven’t seen anything that leads us to conclude that the next three months would be radically different.

“We have seen nothing that could be an inflection point at present.”

However, the group said it would run down its commercial real estate (CRE) operation and stop lending to new and existing CRE customers, as it looks to focus on its core business.

Mr Garner said the move would put “less than a hundred” jobs at risk, with talks under way to see if staff can be redeployed elsewhere in the organisation.

The trading update came as the building society also announced plans to help communities suffering from widespread bank closures.

Nationwide said it was “testing the viability” of a scheme, which would see it open a new branch in Glastonbury next summer kitted out with the latest video technology.

The move would allow customers to access services – such as speaking to a mortgage adviser – through a high-definition video conference link in the branch.

It said there was still a demand for branches, with more than half of its new current accounts opened in a branch over the past six months.

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