Nationwide warns over mortgage competition as profits rise to £1.3bn

The group warned profits ‘are likely to moderate’ in its new financial year

The building society reported a profit of £1.04bn a year earlier. (Getty)

Nationwide Building Society has posted a 9 per cent rise in annual profits, but cautioned that growth will ease back over the year ahead as it battles against competition in the mortgage market.

New chief executive Joe Garner, who took on the top job last month, unveiled underlying pre-tax profits of £1.34bn for the 12 months to April 4, up from £1.23bn in the previous year.

Profits surged 23 per cent to £1.28 billion on a bottom-line basis.

The group warned profits “are likely to moderate” in its new financial year amid competition for new mortgage business and as rock-bottom interest rates put its margins under pressure.

It also said there was a risk that funding costs could surge for lenders if the global economic outlook worsens and hits UK activity.

But Mr Garner said the results show Nationwide is “not in need of radical reform”.

He added: “As the new chief executive, my job will be to build on this success.”

Nationwide said full-year net lending jumped by 28 per cent to £9.1bn, helping the group hold its position as the UK's second biggest mortgage lender behind Halifax.

It also notched up more than half a million new current accounts in the year, up 12 per cent on 2015, giving it a 7.1 per cent share of the market.

The mutual also said it boosted savings business, opening a new savings account every 17 seconds over the year.

But it set the scene for a tougher year ahead, with the group seeing its interest margins fall while it continues to invest in areas such as technology and IT security to protect the group against the increasing threat of cyber crime.

The group said, on a quarterly basis, net interest margins fell across the year and are set to decline further.

Nationwide added that the EU referendum was set to impact the economy in the short term, but should return to long-term growth of 2 per cent to 2.5 per cent a year once uncertainty is lifted.

It said the housing market should also remain “resilient” after the vote.

The group declined to comment on the gloomy Brexit scenarios given by the Treasury on Monday.

But Mr Garner said: “Whatever happens, people will still need homes to live in and still want to save for the future.”