Nationwide H1 profits are down sharply amid an increasingly competitive UK mortgage market and increased spend on IT.
Statutory profits are down by 18% year-on-year to £516m with underlying profits down by 22% to £460m.
Nationwide has also taken a hit via a £135m charge from asset write-offs for the six months to end September.
Nationwide H1 cost-income ratio increases on an underlying basis by almost 10 percentage points to 67.2% from the year ago period.
Specifically, the UK’s largest building society is investing more in online and mobile banking as consumers increasingly switch to digital.
Nationwide says that the additional funds will support the development of new technology platforms. Moreover, the building society aims to accelerate its digital and data strategies.
Margin pressures result in Nationwide’s net interest margin dropping 7 basis points to 1.27% in the first half.
Nationwide H1 highlights
Nationwide says that costs in the first half were flat excluding write offs and the extra IT spend. It remains on track to post £100m in sustainable savings for the full fiscal.
The society continues to punch above its weight for current account openings. In H1 it opened 399,000 new current accounts and ends its first half with a 7.9% current accounts market share.
Long term it continues to target a 10% market share of current accounts.
21.5% of all current account switchers moved to Nationwide, up from 20.2% a year ago.
Notably, Nationwide current account numbers are up by 70% compared with five years ago.
Nationwide’s market share of stock of deposits remains at over 10%.
Joe Garner, CEO Nationwide says: “The strength of our business means we are well placed to invest confidently in the future of the Society.
“We have committed to invest an additional £1.3bn over the next five years to transform our technology estate and capabilities. This takes our total investment over the next five years to £4.1bn.
“We continue to support first time buyers, helping a record 40,500 into a home of their own – 1 in 5 of all first time homeowners.”
Nationwide targets RBS Alternative Remedies Package funds
Nationwide is joining the race to win some of the funds designed to boost competition in the SME banking sector.
The long-awaited RBS Alternative Remedies Package is worth in total £775m.
RBS is to pay £435m to smaller rivals to enable investment in SME banking services. In addition, RBS is to provide £350m to incentivise SME customers to switch to smaller rivals.
To boost its bid, Nationwide is rolling out a business banking account.