Britain’s Nationwide Building Society (POB_p.L) will no longer be able to offer customers above-market savings rates, it said on Friday after setting aside more cash to cover a likely spike in loan losses because of the coronavirus pandemic.
The bellwether mortgage lender booked a 101 million pound ($124.6 million) hit from expected credit losses and will focus for now on maintaining capital reserves after profit for the year to April 4 fell 44% to 466 million pounds.
Nationwide said profit had been under pressure before the pandemic, owing to margin erosion from tough competition in the mortgage market, but the outbreak had made it more difficult to hit some annual targets.
Among these is its goal of delivering more than 400 million pounds in financial benefits to customers through better pricing on the likes of savings deposits.
Paying significantly better rates to savers than the competition has become unsustainable after the central bank cut the base rate to 0.1%, said Chief Executive Joe Garner.
“The cut in base rates put further pressure on our margins and also contributed to our decision to halt business banking,” he said.
Nationwide in April abandoned a push into business banking, saying that the economic fallout from the virus outbreak had made it unviable.
The lender reined in mortgage lending growth during the past year but attracted 15 billion pounds in additional deposits, achieving its target of 10% of current accounts in Britain.
Technology investment again dented its results, with the lender booking a 124 million pound charge.
Unlike the big shareholder-owned banks that are its main rivals, Nationwide – as a member-owned society – is not under pressure to deliver ever greater returns to shareholders.
Nationwide reported a core capital buffer of 31.9%, down slightly from 32.2% the previous year but still ahead of most major rivals.