Nationwide a ‘big gainer’ from switching service after profits surge

Nationwide Building Society has revealed a £270m jump in pre-tax profits for the first half of 2013, up from £103m reported a year earlier. An increase in mortgage lending and the account switching service has helped drive the rise.

The UK’s largest mutual lender said that it had built on the momentum generated in 2012/13, adding that strong business volumes drove an “excellent financial performance.”

The building society’s mortgage lending was at its highest for five years during the same period. The mutual increased its gross mortgage lending by 37%, to £14 billion, accounting for 15.4% of all UK residential mortgage lending.

The bank said it continued to focus on first-time buyers and on “promoting the link between saving and access to low deposit mortgage deals”.

Nationwide also described the new switching services as a “real success” for the bank after 54,000 customers switched to their services. It added, “The society continues to be one of the biggest gainers under the new service.”

The account switching service, a £750m government-backed scheme that guarantees customers can change current account providers in seven working days, launched in September. It is hoped the service will reduce inconvenience and improve market competition.

Chris Rhodes, Nationwide’s executive director, said, “These results show that Nationwide continues to be the main alternative to the big banks.”

He added, “As awareness of the new service grows we expect more people will take the plunge and switch their banking relationship to Nationwide and benefit from our mutual difference.”

Nationwide now has concerns that the issues around the Co-operative Bank will impact on it, according to the BBC. “Nationwide fears that the debacle at Co-op Bank has somehow created an impression that so-called ‘good’ or more ethical banking is incompetent banking”, wrote business editor Robert Peston.

Hedge funds have taken a 70% stake in the Co-op Bank as part of a rescue plan to plug a £1.5 billion black hole on its balance sheet.

Following the recapitalising plan, Co-op is preparing to sell off its renewable lending division and has cut its usual Christmas dividends. Whether or not the Co-op can retain its name, now that hedge funds control a substantial stake, has been put in doubt.

Further reading:

Co-op Bank says ethics are in its constitution – but should we believe it?

Ethical banking: why I’m switching from Co-op to Nationwide

Banking regulator outlines massive shortfall at big banks

Big five’s banking monopoly at risk, with 2.4m closing accounts in 2012

Financial advice industry ‘a long way from making things better’, as banks unveil charges