Nationwide unveils SME lending plan

A new player in the small business lending market is set to
emerge after building society Nationwide today unveiled plans to build
up a range of services in the coming years.

Nationwide, which has previously only hinted at providing financial services to small and medium-sized enterprises (SMEs), said it wanted to play an increasing role in providing credit to an "important part of the UK economy".

The move comes at a time when SME lending remains under the spotlight following pressure on Britain's top five banks to provide more credit to struggling businesses.

Nationwide confirmed the plans as it revealed a 10% rise in underlying profits to £304 million on a 10% rise in underlying income to £2.1 billion.

Nationwide chief executive Graham Beale has previously said that SME lending would be a "good strategic fit" for the building society - but corporate customers should not expect loans to be available until late next year.

"We're already a lender to the commercial real estate sector, we've been asked by customers to provide them with a corporate lending facility," he said. "We just feel it's a natural extension of what we can do."

He added: "We're quite confident there's sufficient demand."

The Project Merlin agreement last year was drawn up between the Government and banks in a move designed to boost lending to SMEs.

Lloyds Banking Group, Royal Bank of Scotland, Santander UK, Barclays and HSBC agreed with the Government to increase lending available to SMEs to £76 billion and boost lending available to all businesses to £190 billion.

The final figures confirmed that the five banks missed gross lending targets for small businesses last year by more than £1 billion but beat the target for all businesses by £24.9 billion.

Meanwhile, the building society said it increased gross mortgage lending by 44% to £18.4 billion in the year to April 4 in a market which grew only 5%.

More than 24,000 first-time buyers took out a mortgage with Nationwide in the period, compared to 22,200 the previous year.

The building society maintained its Base Mortgage Rate pledge, which has seen many borrowers revert to a rate capped at 2% above the Bank of England's 0.5% base rate.

Nationwide said it estimates the cost of the pledge has been in the region of £750 million over the past year, equating to an average of more than £1,000 net benefit for each account per year.

Nationwide is the second largest savings provider in the UK, with net savings receipts for the year up 67% at £1 billion, while new sales of debit cards, credit cards and personal loans were up 13% at 828,000.

The group said it had increased the charge set aside to cover the cost of payment protection insurance mis-selling claims by £103 million, on top of £16 million set aside in the previous year.

Its bad debt charges were broadly flat at £428 million, with a rise in commercial lending provisions being largely offset by an improvement in retail lending charges.

The building society said it had no direct sovereign exposure to struggling eurozone countries Portugal, Ireland, Italy, Greece and Spain.

PA