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Nationwide ends bonus hopes

Nationwide, the standard-bearer of mutual building societies, dashed any hopes its members may have had of a windfall bonus yesterday and renewed its commitment to paying "internal dividends" in the shape of higher savings rates for investors and cheaper mortgages for borrowers.

It also reported a 33 per cent leap in profits to pounds 459m in the year to 4 April, helped by a 19 per cent drop in bad debt provisions to pounds 124m, a further improvement in cost control for the eighth year in a row, and an upturn in market share after several years of gradual decline.

Helped mainly by a campaign to attract more business through intermediaries, new lending recovered by 37 per cent, even excluding the acquisition of the UCB Home Loans loan book. The margin between rates charged to borrowers and rates paid out to savers widened slightly in the society's favour from 2.41 per cent to 2.45 per cent and net interest receivable rose by 6 per cent to pounds 907m.

But other income fell by a quarter to pounds 146m, reflecting a fall in income from insurance commissions caused by the tough competition in the market place. Total income was actually static at pounds 1.05bn. But the society's administrative costs fell by 7 per cent to pounds 469m and the ratio of costs to income dipped to 44.5 per cent, which is four points below the average of the top 10 societies. Eight years previously it was 65.2 per cent, and significantly above the average for the top 10 societies.

The outlook remains good, and should ensure that Nationwide will uphold its promise to pay out pounds 200m worth of internal dividends to its members in the current year.