Nationwide Building Society has seen its annual profits tumble by nearly a quarter after it moved to protect savers from rock-bottom interest rates.
The mutual reported a 23% plunge in underlying pre-tax profits to £1.03 billion for the year to April 4 after it was hit by the Bank of England’s decision to slash rates to 0.25% last summer following the Brexit vote.
Nationwide said it gave members a £505 million boost by keeping its savings deposit rates higher than rivals while passing on the base rate cut to mortgage borrowers in full.
Its move to protect savers helped see the group’s deposit balance surge by £5.8 billion, while it notched up record membership of 15 million.
On a bottom-line basis, profits fell 17.6% to £1.05 billion, but the group insisted profits remained within its target range.
Chief executive Joe Garner said: “As a member-owned organisation, we don’t seek to maximise our profits, but to manage them in our members’ interests.
“We make conscious choices about how we distribute our profitability between strategic investment, capital generation and member financial benefit.”
Nationwide said it was seeing “tentative” signs of a slowdown in the wider economy, with Brexit-fuelled inflation affecting household spending.
It warned over a slowdown in house price growth, with property values set to rise by 2% this year and “scope for a further softening in 2018 to 2019”.
Nationwide said it expects ongoing pressures of low interest rates and competition in the mortgage market, but added that it was off-setting some of this with cost-cutting efforts.
Its net interest margin - a key measure for lenders - fell by £126 million to £3 billion, although Nationwide said it expects this to remain “broadly stable” in the current financial year.
The group said gross mortgage lending rose 3% to £33.7 billion, while current account business surged by 35% as a record 795,000 accounts were opened.
Despite the profits hit and cost-cutting, Nationwide confirmed aims to invest £80 million in revamping its branches, while it will also open branches in communities left without access to banks.
It recently opened a branch in Glastonbury in Somerset after it was left without a bank.