Nationwide sees profits surge as bad debts fall

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The Independent Online

Annual profits at Nationwide surged as the level of souring loans fell by more than a third, the country's biggest building society said yesterday.

Underlying pre-tax profits rose by 30 per cent to £276m in the year to the beginning of April as bad debt charges fell by 35 per cent. Statutory pre-tax profits were lower, however, easing to £317m from £341m, mostly owing to accounting changes.

The strong underlying performance came against the backdrop of a "smaller mortgage and savings" market, the chief executive, Graham Beale said. Like other lenders, Nationwide also had to contend with "abnormally low interest rates", he added.

Recent decisions from the Bank of England have been closely scrutinised for signs of an early interest rate rise, but Mr Beale aligned himself with the consensus view in the markets that the monetary environment will remain loose through the summer.

"We do not think we will see any move in interest rates until the end of the year, around about November," he explained. "By the end of 2013, we may see rates at 2.5 per cent."

The building society also joined other lenders making provisions for mis-selling payment protection insurance, putting aside £16m to cover claims. Lloyds grabbed the headlines when it said it was putting aside more than £3bn to cover possible claims, while Barclays, RBS and HSBC have announced smaller provisions.

Yesterday, Nationwide said its sales of PPI were comparatively low. "We had a rigorous sales process in place," Mr Beale said. "Consequently, our own provision for customer redress, with a charge for the year of £16m, compares very favourably with the several billions announced by the banks during the past month."

"Customer service is very important to us," Mr Beale added, highlighting the latest complaints data from the Financial Services Authority showing that Nationwide accounted for less than 3 per cent of all complaints.