On 27 May Nationwide Building Society reported a loss of two thirds in profits for April. It attributes this partly to an exceptional charge of ?241 million to the Financial Services Compensation Scheme (FSCS) says a report on Telegraph.co.uk.
Nationwide said this charge represented its share of interest on a three-year loan from the Treasury to the FSCS. The FSCS was set up to pay compensation to savers in the event of a bank or building society going bust.
Nationwide attributed the losses to ?the cost of carrying additional liquidity and margin compression in a low interest rate environment, together with an increase in impairment provisions in the current recessionary conditions?. This means that the building society needs to increase its future provision for bad debt and is unable to make as much profit on savings and mortgages while low rates continue.
However, Nationwide added that the figures show that they have achieved a ?resilient performance? in difficult recent conditions and they have not been in the position of requesting government support or had to raise further capital. The amalgamation of the Derbyshire and Cheshire building societies and parts of the Dunfermline had allowed it to increase its assets too. Nationwide said further that competitive interest rates and reduced fees and charges had benefited its members.
Other figures show a good performance in mortgage arrears with 0.6 per cent of mortgage accounts in arrears over three months. This compares favourably with an overall industry average of 2.39 per cent. Unsecured personal loan balances had increased by 7.15 per cent from 5.88 per cent but is not bad in comparison with the average figure of 17 per cent.
Nationwide CEO Graham Beale said: ?Profitability has been adversely affected by the low interest rate environment and increased provisions as a result of the current recession.?
