Nationwide full-year profit halved
UK mortgage lender sees broad stability in market over six to 12 months
(LONDON) Nationwide, Britain's largest building society, said it expected broad stability in the housing market over the next six to 12 months, when posting a near halving of full-year profit yesterday.
House prices have recovered ground in recent months, though they fell in February and April, according to rival lender Halifax, raising questions over the strength of the market.
'Unless there is a significant spike in interest rates, which we are not expecting, a major dip in prices is unlikely to occur over the next year,' Nationwide chief executive Graham Beale said.
Data from Nationwide itself, Britain's third-largest mortgage lender, showed a one per cent rise in house prices in April, taking the annual rate of increase into double digits for the first time in nearly three years.
Nationwide said an increase in properties for sale would relieve pressure on prices, while a continuing lack of credit and high prices relative to salaries would act as an upward limit.
Customer-owned Nationwide said it had been hit by the contraction in its core mortgage and savings markets and by pressure on margins. Underlying profit in the year to April 4 almost halved to £212 million (S$429 million).
The lender said it saw lower levels of profitability continuing throughout 2010.
It lent £12 billion of mortgages over its past financial year, representing a market share of 8.7 per cent, down from 9 per cent in 2008-09. Nationwide said it had no 'aggressive growth plans' and expected to remain at that level.
The building society, under pressure from weak markets and low interest rates, plans to accelerate cost cuts to hit a targeted cost/income ratio of less than 50 per cent by the end of 2012-13 from a current 61.3 per cent.
It will review its distribution network, swollen by recent acquisitions, and administrative buildings. Nationwide has over 1,000 retail outlets.
'It is quite an extensive network, and we need to make sure it is the right shape for the business. . . We need to adjust our business model to reflect the market conditions,' Mr Beale said.
Nationwide has already cut more than £150 million of costs over the past three years and shrank its workforce by just under 800 staff over the past 12 months to almost 15,800.
Mr Beale declined to comment on further job cuts and said the review underway would take 'years not months'.
Arrears remained broadly flat, with mortgages three months or more in arrears totalling 0.68 per cent, well below an industry average of 2.2 per cent and expected to remain stable. Bad debts on the commercial properties saw a significantly better second half, with impairment charges dropping 20 per cent to £119 million.
Nationwide, echoing rivals across the sector, said it expected lower levels of impairment going into the coming year as commercial bad debts have peaked, adding a slower recovery and weak tenant demand could throw that off track. -- Reuters
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Optimistic: Echoing rivals, Nationwide says it expects lower levels of impairment next year as commercial bad debts have peaked
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