Another Nationwide article below - they are really struggling with that low base rate - their profits have fallen so much!

Nationwide profits woe as savers flee

Nationwide will consider cutting branches and jobs after reporting a 46% fall in profits as savers fled the mutual society and mortgage lending tightened.

Nationwide, Britain's largest building society, made pre-tax profits of £212m in the 12 months to 4 April, down from £393m in the previous year.

It said it would accelerate cost cutting, with some of the group's 1,000 or so branches likely to be cut and staff at its 20 back office sites also a target.

Nationwide is already trying to trim dead wood following the deals that saw mergers with the Derbyshire and Cheshire building societies last year, and the takeover of Dunfermline's savings book.

Some 800 jobs went last year, along with 12 branches.
While Nationwide struggles to cut costs, it has been undermined by worsening performance in its key mortgage and savings businesses. In a statement Nationwide said it had seen 'significant contraction in our two principal markets'.

It reported that a net £8.2bn of savings had been withdrawn by customers last year. It blamed stiff competition for customer deposits from banks and Government-backed businesses for the mammoth drop in savings, but said it had begun to stem the flow in the second half.

It also suffered negative net residential mortgage lending of £3.6bn last year. It tried to strike a more positive note on the housing market today and predicted that, despite recent reports, a major dip in house price was unlikely.

Today's profits blow comes after a 69% drop the previous year as the group struggles to maintain margins in the face of a record low bank base rate, which looks set to remain at rock-bottom until the economic recovery picks
up pace.

The group said Government belt-tightening and potential tax hikes could heap further pressure on profits.

Bad debts rose to £549m from £394m a year earlier, although the rise was solely driven by commercial property loans turned sour.

Nationwide said it believed the worst of the commercial property woes were now behind it, after impairment charges related to these investments dropped by 30% in the final six months.
Yet it cautioned that Government spending cuts and austerity measures could lead to higher unemployment and therefore a hike in customer mortgage arrears.


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