Nationwide Building Society reveals increased profits for the year to April but a reduction in mortgage lending.
Underlying profit increased to £2,233m (2022: £1,604m) and statutory profit increased to £2.23bn (2022: £1.58bn) driven by income growth
Rising interest rates supported growth in total underlying income to £4.67bn (2022: £3.87bn).
However, total gross mortgage lending reduced by £2.9bn to £33.6bn (2022: £36.5bn), with net lending of £3.3bn (2022: £7.1bn). Market share of balances was 12.2% (2022: 12.4%) in what Nationwide refers to as a highly competitive market.
Nationwide Building Society Chief Financial Officer Chris Rhodes comments: “Strong underlying profits have improved capital, with a leverage ratio of 6.0%. In addition, our strong deposit inflow of £9.1bn increased our market share of deposits to 9.6% and further strengthened our liquidity position.
He adds: “The sustained strength of our finances has allowed us to support our members through a highly uncertain period and significant cost of living increases.
There is a mixed response from brokers to Nationwide’s latest figures.
Mather & Murray mortgage adviser Samuel Mather-Holgate says: “Nationwide have always been a vanilla lender, looking for customers with whiter than white credit history. It’s no surprise that their credit impairment charges are low, but even Nationwide say they expect this to increase this year.
He adds: “Nationwide’s share of the pie remained similar to the previous year, but net lending was down nearly 10% showing an overall decline in confidence in the housing market that is unlikely to return until rates start getting slashed later this year. Overall, these results seem very positive for a lender that will be thankful of their policy to exclude those most vulnerable to economic shocks.”
R3 Mortgages director Riz Malik comments: “It is notable that Nationwide seems to be well-positioned to navigate potential economic turbulence. The relatively low loan-to-value (LTV) ratio of 55% on their residential portfolios provides a degree of resilience against minor fluctuations in property values”. However, Malik points out that the growing credit impairment charge due to anticipated increases in arrears, linked to affordability issues, is a cause for concern.
“Indeed, there’s an economic storm on the horizon. As the rise in interest rates eventually affects a larger segment of the population, particularly when more individuals need to refinance their mortgages, financial stress could become more widespread. Nationwide, like its counterparts, seems to be preparing for these challenges ahead,” he says.
SelfEmployedMortgageHub.com founder Graham Cox believes Nationwide’s preliminary results highlight how fundamentally the mortgage market has changed in the last year.
“Net lending is less than half what it was in the previous year, illustrating just how much demand has slowed as interest rates have risen. They also confirm house prices will remain ‘subdued’ throughout 2023, though whether that means they think prices will continue falling or flatline isn’t clear.
“Personally, I think it’s highly likely they’ll fall due to high mortgage rates and the cost-of-living crisis.”
