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May 22, 2008    

Lending down at Nationwide but profits up

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by Kay Murchie

Nationwide building society agreed mortgage loans worth £6.7 billion last year, down from £11.2 billion the previous year. This represents a 40% fall as tough credit conditions led it to cut back lending.

However, the figure is in line with industry forecasts for a sharp reduction in total mortgage lending this year.

Britain’s largest building society saw its profits increase sharply last year after posting a 5% rise in annual profits to £686.1 million.

Profits were boosted by a significant increase in retail deposits as savers abandoned crisis-torn Northern Rock and headed elsewhere.

Graham Beale, Nationwide’s CEO, said prior to the credit crunch, we had opted not to go for massive growth in market share because that was simply uneconomic.

Rather, we decided to fund our net lending entirely from retail receipts. As a result, Nationwide’s mortgage market share fell from about 11% to 7.1%, said Mr Beale.

This cautious approach drove underlying profits up by 17% to £781 million. Furthermore, the merger with the Portman Building Society helped bolster the balance sheet, with total assets up 30% to £179 billion.

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Tags: cautious approach, lending down, , profits up