LONDON - Nationwide Building Society (LON:NBS) has reported a significant increase in its interim profits, driven by the rise in interest rates. The pre-tax profits for the institution climbed to £989 million for the six months ending September 30, marking a £20 million year-on-year increase. This financial boost was supported by a broad expansion in total underlying income, which grew from £2.19 billion to £2.45 billion, and an improved net interest margin, up from 1.48% to 1.66%.
The organization also saw a decrease in credit impairment charges, which dropped to £54 million as the economic conditions surpassed expectations, signaling early signs of the cost-of-living crisis easing. Despite this positive trend, Nationwide did report a slight rise in bad loans, with 0.38% of residential mortgages experiencing repayment delays over three months, attributed to inflationary pressures and economic uncertainty.
Nationwide's Chief Executive, Debbie Crosbie, praised the society's strong performance and highlighted their strategic efforts aimed at ensuring future stability and improving the customer banking experience. She pointed out the rebranding effort in October 2023 as a key move to strengthen customer relationships.
By this morning GMT, Nationwide's shares had seen an uptick of 1.97%, reaching a value of 116.25p.
In a more comprehensive overview of its half-year performance, Nationwide revealed that its pre-tax profit rose to £1.3 billion from £980 million compared to last year. The higher borrowing costs have bolstered income despite a downturn in mortgage lending amid a quieter housing market. As a member-owned entity, Nationwide is set to distribute £344 million back to its eligible members this year.
The rise in interest rates has led to an increase of £250 million in underlying income from loans, while deposits expanded by £4.2 billion due to more attractive fixed-rate deals offered by Nationwide. These deals have made it possible for the society to attract customers from other banks.
Chris Rhodes, Nationwide's CFO, acknowledged the competitive banking landscape and touted Nationwide's superior savings rates. He noted that base rates are expected to peak soon and mentioned a minor uptick in borrowers falling behind on payments due to persistent inflation.
Nationwide is responding to market conditions with new product offerings such as five and two-year mortgages with interest rates below 5%. However, Rhodes suggested that stimulating the housing market could take up to two years.
Crosbie emphasized the society's robust performance and societal contributions, noting that their customers have shown resilience during challenging economic times. The government's "mortgage charter" was also mentioned; Rhodes commented on the modest uptake of support measures and predicted a future decline in fixed-rate mortgages due to this initiative.
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