Profits at Nationwide the UKs largest building society fell 69% in the year to April, as Financial Services Compensation Scheme fees, increasing bad debt and low interest rates took their toll.
With their contribution to the Governments compensation scheme amounting to £241 million, the lender reported profits down by £473 million for the year.
Chief Executive Graham Beale repeated previous criticism of the compensation scheme fees saying “We regard the fact that the charge is not linked to the level of risk posed to the financial system by individual institutions, but instead is allocated by share of the retail savings market, as illogical and unfair, producing a disproportionate outcome for the low risk retail funded institutions, particularly building societies”.
Bad debt reached £394 million and is expected to rise further, although the proportion of residential mortgages more than 3 months in arrears remains well below the industry average of 2.39% at 0.6%.
Commenting, Mr Beale said “Nationwide has remained strong in the midst of all this turbulence and has been the only major UK banking institution not to raise capital or seek access to Government sponsored capital enhancing schemes”.
Nationwide also felt the pinch as state owned institutions such as Northern Rock scooped up in excess of 70% of the savings market in the second half of 2008.