NATIONWIDE, the big mutual competitor to the banks, made record profits last year as it attracted 107,000 customers from rivals but also managed to raise mortgage rates and lower savings rates for many members.
The building society raised mortgage lending by 31 per cent, net lending by 52 per cent, and account openings by 18 per cent to 430,000, as it quadrupled pre-tax profits to £677 million.
Underlying profit rose by a more modest 113 per cent to £924m, after stripping out items including £69mfor customer redress from mis-selling and £39m for the integration of its three acquired societies including the Dunfermline.
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Nationwide last year closed 22 of the 32 Dunfermline branches in Scotland though 16 have merged with Nationwide sites and rebranded. The society said the aim was to "eliminate unnecessary duplication while preserving levels of physical access for members as a whole", and savings from the entire programme would top £25m a year.
The big driver of profit was the net interest margin , which jumped from 1.02 per cent to 1.25 per cent, rising to 1.40 per cent by the year end.
"The most significant drivers of our higher margin were maturing fixed mortgage deals repricing onto higher margin products, and lower retail funding costs that reflect reduced demand across the market for retail savings, in part as a consequence of the availability of the Funding for Lending Scheme (FLS)," Nationwide said. The FLS had effectively depressed savings rates by some 0.8 per cent over the year, it revealed, while adding 0.02 per cent to its own profit margin.
Although lending at its lowest mortgage rates eased from £54 billion to £52bn, out of total residential lending of £146bn, the society said this still represented a "significant distribution of value to members with a headline pay rate of 2.5%". Similarly the society's Loyalty Saver account, offering the highest rates to the longest-established members rather than those with the biggest balances, was worth £130m to savers, Nationwide said. Balances more than doubled to £17.2bn, benefiting more than 810,000 members.
Gross mortgage lending hit £28.1bn, a market share of 15 per cent, while net lending of £9.9bn gave it market share of a massive 71 per cent, including over 20 per cent of the first-time buyer loan market. Deposit balances grew by £4.9bn, amounting to a 12 per cent market share.
The society's troublesome commercial real estate portfolio was shrunk by almost one-quarter to £7.8bn, in an improving market. Its tier 1 capital ratio improved from 9.1 per cent to 14.5 per cent following the successful issuance of £550m of "mutual friendly" core capital deferred shares (CCDS) in December, and £1bn of additional capital in March.
Graham Beale, chief executive, said Nationwide was "recognised as the strongest financial brand in the UK across a number of metrics", and despite its market shares accounted for only 3.5 per cent of all industry complaints. He added: "We will continue to provide our members with innovative and market leading products and services, which together will reinforce Nationwide's position as a clear and compelling alternative to the established banks."