Nationwide Building Society has unveiled an 18% slip in half year pre-tax profits and an increase in bad debt. It says its has suffered from the “challenging economic environment”, which it predicts will last well into next year.
Despite the fall in profits, the UK’s largest building society says it is “strong and well placed” compared to its rivals and it adds that consumers are making a “flight to safety as they recognise the strength of Nationwide”. It has reported £2.6bn of net receipts, an estimated market share of 34%.
Its results see drop in pre-tax profits to £322m for the six months to September 30, down from £394m for the same period last year. Its mortgage lending fell by £1bn during the six months to £3.6bn.
It says that bad debts have risen to £74m, up from £62m last year, as borrowers struggle with their repayments. However, the number in arrears is 0.4%, compared to an industry average of 1.33%.
The fall in profits is also attributed to the costs of its 2007 takeover of the Portman building society. In September, the building society confirmed it was also taking over the Derbyshire and Cheshire building societies after they ran into financial difficulties.
Nationwide chief executive, Graham Beale, says: “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.
“Wholesale market conditions remain fragile and we expect the challenging economic environment in the UK to persist well into 2009. However, notwithstanding this, Nationwide is well placed to maintain its strong financial position providing security and a safe haven to investors and depositors in uncertain times.”
Last week, Nationwide head of brand marketing Peter Gandolfi left the building society just weeks after it called a review of its £10m advertising account (MW last week). The pitch has since been put on hold and Nationwide is now in talks with its agency Leagas Delaney. The agency resigned the business last month.