Nationwide, the UK’s largest building society has announced that its share of the mortgage market has reached a new record high.
It said the rise had been due to a big increase in the number of first-time buyers over the past 12 months who have been encouraged to get on the property ladder due to the impact of the Bank of England's Funding for Lending Scheme which has seen a number of competitive new mortgage deals introduced for first-time buyers.
It now has a 15.1 per cent share of the mortgage market, up from 13 per cent, after seeing gross mortgage lending rise by 17 per cent in the year to April 4th 2013 to £21.5 billion.
During 2012 it provided loans to more than 42,000 first-time buyers, an increase of 75 per cent and means that the society provided finance for 20 per cent of all first-time buyer mortgages in the UK in 2012.
Its increase in share of the mortgage market was helped by the Bank of England’s Funding for Lending Scheme (FLS) which saw Nationwide draw £2.5 billion from the scheme that allows lenders to borrow at reduced rates on condition they pass on the savings to customers and businesses. This helped its net lending rise to £6.5 billion from £2.7 billion in 2012.
It has also seen 365,000 new current accounts opened in the past 12 months, a 58 per cent increase in people switching to Nationwide for their main bank account, in part due to a new competitive current account, Flexx Direct, that pays five per cent interest on credit balances up to £2,500 for the first 12 months.
It has attracted 123,000 customers to switch their main banking relationship to the Nationwide.
Executive director Chris Rhodes said: “Dissatisfaction with the big banks is leading people to vote with their feet.
“We opened new current accounts at a rate of one thousand per day over the last year and many of these were people switching from another provider. These results show that Nationwide really is the main challenger to the big banks.”
This means the bank has 5.2 million people with current accounts and its market share of main standard and packaged accounts is now 5.7 per cent, up from 5.1 per cent in 2012.
The positive financial results are in sharp contrast to the Co-op, another mutual lender who announced a £599 million loss in March due to overexposure and toxic loans in its commercial property division.
This led to ratings agency Moody's to downgrade the Co-op's credit status to junk.
Nationwide chief executive Graham Beale was keen to pint out the differences between the two lenders.
He said: "You can’t read across from the co-operative to the building society movement."
Mr Beale said Nationwide had worked hard to build and maintain a sustainable business model.
He said: “Our financial position remains strong and robust. Our balance sheet is characterised by high quality assets, prudent levels of liquidity, a strong and diversified funding base and peer group lending capital ratios.”
The bank’s statutory profits went up by three per cent to £210 million, from £203 million last year despite seeing turnover rise by 18 per cent to £2.5 billion. The slight increase in profits was affected by a £165 million hedging loss. Underlying profits went up by 56 per cent to £475 million.
However, commercial lending losses doubled to £493 million from £247 million. In a statement Nationwide said this was due to "the continuation of negative sentiment toward commercial real estate and the uncertainty surrounding the economic outlook in the UK" and that the sector “continued to pose challenges to our short-term profitability”.
It also set aside a further £53 million to cover payment protection insurance (PPI) compensation claims, taking the total it has set aside for this issue to £181 million.
Graham Beale said in a conference call that the bank plans to raise more funds but not to cover any capital shortfall.
Mr Beale said: "We do think it's important that we've got access to capital from a strategic viewpoint, either to respond to some shock to our system or for some inorganic opportunity or an accelerated growth plan."
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