Nationwide claims mutual benefit from mortgage boom

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The Independent Online

Nationwide, the UK's largest building society, once again hailed the success of mutuality yesterday, as it unveiled a 24 per cent rise in pre-tax profits and said its members would benefit from some £660m in lower fees, charges and interest rates this year.

The society, which is owned by its customers rather than investors, made underlying pre-tax profits of £668.6m for the year, and increased its assets by just under 14 per cent to £137.4bn.

Growth in the business was driven by success in its mortgage business, where Nationwide's net lending almost doubled to £10.6bn for the year to the start of April. The building society also continued to take market share in the current account market, where it grew its number of accounts by 12 per cent over the year to some 4 million.

The society also escaped with a much better level of arrears than its rivals, with just 0.24 per cent of its mortgage customers more than three months behind in their payments, compared with an industry average of 0.87 per cent.

Consumer debt levels have risen sharply over the past few years, with insolvency levels rocketing across Britain. However, Nationwide said it had been careful to maintain the quality of its lending book.

Nationwide is currently in the process of taking over the Portman Building Society - a deal which will make it the second largest provider in both the UK retail savings and mortgage markets. The deal is due to complete on 28 August.

The Society also recently announced plans to sell its life insurance and asset management operations to Legal & General, while also sealing a distribution agreement with L&G to sell its products through its branches.

Graham Beale, who took over as chief executive of Nationwide from Philip Williamson in April, said yesterday's strong results, and the subsequent rewards for investors, underlined the Society's commitment to mutuality.

"During the year we have put in place measures to ensure we continue to provide consumers with a real alternative to the banks and with real value," he said. "With no shareholders to worry about, we continue to focus on putting our members at the heart of everything we do. The profit that we make is used to invest in the business and future growth. We are in excellent shape and are extremely well placed to meet the challenges ahead."

The finance director, Mark Rennison, added that Nationwide's mutual status had been the key to its strong performance in such a competitive year for the industry. The society expects to see growth in the housing market slow this year to about 8 per cent for the year, but Mr Rennison said he was confident profit margins would remain stable for the business.