Nationwide profits fall as it pours more cash back into society
Nationwide reported “strong trading” in its interim results on Thursday, and announced its intention to launch a current account for small businesses.
The member-owned building society reported underlying profit of £460m in the six months ended 30 September, down from £589m year-on-year, with its statutory profit slipping to £516m from £628m, which was in line with its expectations.
Profits were after a charge of £135m from asset write-offs and incremental technology spend, as the organisation increased its investment to meet what it described as the future needs of its members.
Costs remained flat, excluding asset write-offs and additional technology investment, with Nationwide saying it was on track for £100m sustainable saves in the 2019 financial year.
Its UK leverage ratio stood at 5.0%, up from 4.9% on 4 April, with its CET1 ratio rising to 31.7% from 30.5% over the same period.
On the operational front, the society said that over the next five years it would invest an additional £1.3bn in technology, as it initially announced in September, taking its total investment to £4.1bn over that period.
It announced its intention to launch a business banking current account, which the board said would bring its service, scale and mutuality to small businesses.
Nationwide said it remained committed to its £350m ongoing investment programme in the branch network.
“In the last six months, we have continued to grow strongly, our members have continued to benefit from competitive rates, attractive products and leading service, and we have improved our already robust financial position,” said chief executive officer Joe Garner.
“The strength of our business means we are well placed to invest confidently in the future of the Society, and we have committed to invest an additional £1.3bn over the next five years to transform our technology estate and capabilities.
“This will take our total investment over the next five years to £4.1 billion and will ensure the society makes the most of the opportunities ahead.”
Garner said the organisation would develop new propositions, further enhance its service, simplify its operations and build new skills for the future.
He said that conscious decision to increase investment was underpinned by the “continued strength” of the society’s performance over the last six months.
“We continue to lead our high street peer group for customer satisfaction by a significant margin.
“We protected savers and rewarded loyal members, delivering £330m in member financial benefit through better rates, fees and incentives than the market average over the half year.
“The special rate ISA, available exclusively to our loyal members, contributed to a £5.1bn rise in deposits.”
Garner also noted that the society continued to support its first time buyers, helping a record 40,500 into a home of their own, or one in five of all first time homeowners.
He also said more people were choosing Nationwide for their everyday finances, with almost 400,000 current accounts opened with the society so far this year.
“Our success in the personal current account market, where we have grown accounts by 70% in the last five years, has given us the confidence to accelerate our entry into the business banking market.
“The funding available from the Banking Competition Remedies remains important to us as it will allow us to bring our proposition to market faster and with greater impact.
“50,000 members a year ask us to provide business banking, and we believe we can offer a compelling mutual alternative to Britain's currently underserved 5.6 million small businesses.”
Joe Garner said Nationwide was “here for the long term”, with the board believing it could make a lasting difference in the market, as it had in the personal current account market, thanks to the combination of leading service and good value.
He said that was “the logical next step” in bringing mutuality to more people.
“Our first half profits were lower than last year because we have chosen to increase our investment in the future of our society.
“As a mutual, we do not judge our success by profit growth alone, but by how we manage our profits to serve our members' interests.
“We do that by maintaining the high-quality service and excellent value products our members prize today, while also investing in building new propositions, services, and skills, so we can meet members' future needs.”