Nationwide profit plunge on 'unfair' levies

Published 27th May 2009

Nationwide Building Society today announced a 69 per cent fall in pre-tax profits to £212 million and criticised the high cost of the Government’s scheme to guarantee savers’ funds as "illogical and unfair".

Britain's biggest building society blamed its fall in profits on a combination of low interest rates, the cost of holding additional liquidity during a recession and the high charges it had to pay the Financial Services Compensation Scheme (FSCS) - the fund of last resort that guarantees savers up to £50,000 if a bank or building society fails.

Unlike many banks, Nationwide has not sought to raise capital nor applied for government aid - although its provisions for bad debts have soared from £106 million to £394 million over the past year including a £91million loss on mortgages.

Graham Beale, chief executive of Nationwide, said that he was angered by the £241 million in levies that the building society had had to pay to the FSCS. He said that profits were 53 per cent lower than they could have been because of the charge.

FSCS levies are exceptionally high after the failure of several banks and financial institutions triggered a series of claims against the scheme in the past year.

Mr Beale said: "We regard the fact that the FSCS charge is not linked to the level of risk posed to the financial system by individual institutions, but is instead allocated by share of the retail savings market, as illogical and unfair."

He said that he had lobbied the Government for an increase in the FSCS limit from £50,000 to at least £100,000 to "reassure savers with independent institutions that they have similar protection as those with Government-owned, nationalised and part-nationalised banks". He said that he had the backing of 173 cross-party MPs.

In the past year, the Nationwide has merged with the Portman, the Derbyshire and the Cheshire building societies and has acquired assets from the Dunfermline Building Society, increasing its assets by 13 per cent to £202.4 billion, compared with a year ago.

Mr Beale said: "Despite the challenging environment, an estimated £680 million benefit has been provided to members in the year through competitive interest rates and lower fees and charges."

In its statement today, the building society said: "This set of results demonstrates a resilient performance in an exceptionally difficult market place.

“During the period, the society has remained free from government support, has not needed to raise additional capital and its assets have increased organically in addition to the integration of three regional brands. The society remains profitable and is here for the long term, providing consumers with a real and attractive alternative to the banks."

Source: ' Times '

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