Nationwide profit plunges 33 per cent
Nationwide has posted a sharp fall in half-year profit following a final blow from payment protection insurance (PPI) charges and a low interest rate environment.
Statutory profit for the six months to 30 September fell to £309m, sliding from £516m in the same period a year earlier.
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As well as suffering costs from a surge in PPI complaints, the building society’s profit was hit by lower income and investment costs.
Chief executive Joe Garner told City PM that the biggest challenge in the year ahead will be pressure from low interest rates.
“Interest rates have been below one per cent for over a decade now. That is fabulous news for borrowers and mortgage holders, but savers have for the last decade had a much worse time of things,” he said.
Garner added that there are “no signs of any increase in rates on the horizon”.
On Garner’s £2.3m pay package, the chief executive said: “The board sets the pay below what competitors and comparable firms would set.”
He said: “I appreciate these are large sums of money but as a mutual building society members vote on pay and the vote was over 90 per cent in support”.
On PPI, Nationwide took a final PPI charge of £36m in the first half of the financial year, in the middle of the £20-50m range previously announced.
The firm’s net interest margin – a key measure of underlying profitability – fell from 1.23 per cent to 1.12 per cent.
“Whilst the economic outlook remains uncertain, we expect the current low interest rates and competition in our core markets to continue,” it said.