S&P also criticised all societies for what it said was an over-lenient policy towards arrears and repossessions, because this could prolong the impact on their balance sheets. In a survey of UK societies, S&P said the downgradings did not herald a similar move against other building societies.
The problems in the housing market had 'impacted Nationwide and Britannia more severely than other rated societies, partly because of management's response to the new environment'.
Britannia and Nationwide had weaker financial profiles than the average for the largest societies and therefore were not as flexible in dealing with the pressures.
Nationwide had a consistently higher cost base than competitors and a sharp rise in costs at Britannia in 1990 meant its cost ratios were only average.
S&P added that societies showed marked differences in the way they managed arrears, with Nationwide and Britannia relatively optimistic about the market until a few months ago. 'In both cases, inadequacies in arrears management have been revealed which have exacerbated their problems, but the societies have significantly strengthened this area in recent months.'Reuse content