Cheap money from Bank of England sees Nationwide's profits double

Britain's biggest building society, Nationwide, doubled its profits in the past nine months and has primed its balance sheet with cheap money from the Bank of England to keep up a rapid pace of mortgage lending.

The society tapped the Bank's Funding for Lending Scheme (FLS) for an extra £4bn in January, almost matching the £4.5bn it borrowed in the first 16 months of the scheme. This was in reaction to the Government's decision to change FLS so that it could only be used for lending to small and medium-sized businesses from the end of January.

Nationwide's chief executive, Graham Beale, said: "We have effectively pre-funded the balance sheet for lending for the coming year. We have actually already lent far more than we have borrowed through FLS with net lending of £8.4bn in the nine months to December and £15bn over the length of the scheme."

On average, borrowing money from the Bank has cost Nationwide around half a percentage point less than borrowing from wholesale money markets, although the gap has narrowed as the scheme has pumped extra liquidity into the market.

Mr Beale does not believe this has fuelled a potential housing bubble. He said: "I've spent a long time looking at the last housing crash in the early 1990s. The difference today is that employment figures remain strong and affordability of housing is still good.

"While there is growth in the number of transactions and house values, both are below their pre-crisis peaks. London is an anomaly because of special external factors," he added.

Nationwide increased gross lending by 34 per cent to £21.6bn in the nine months to December and net lending was £8.4bn, an increase of 58 per cent. Savings balances grew by £5.8bn, while customers opened 316,700 new current accounts as Nationwide was "a net beneficiary" of easier, seven-day switching rules that came in last autumn. Its share of the current account market, however, remained static at 6 per cent.

Underlying profits doubled to £539m. Mr Beale said the combination of retained earnings from those profits and the £550m raised through an issue of core capital deferred shares in December meant it should hit the Prudential Regulation Authority's order to remove a £1bn gap in its balance sheet ahead of the target of December 2015.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea