'Subdued' mortgage market weighs on Nationwide

(Sharecast News) - Nationwide Building Society posted a dip in annual profits on Thursday, a day after Virgin Money shareholders voted in favour of the lender's £2.9bn takeover. Total underlying income was largely flat in the year to 4 April, at £4.7bn, while underlying pre-tax profits came in at £2bn, down from £2.2bn a year earlier.

Pre-tax profits fell to £1.8bn from £2.2bn.

Mortgage lending edged up to £204.5bn from £201.7bn, while member deposit balances rose by £6.3bn to £193.4bn, as customers saved more.

Nationwide said mortgage lending had been "robust" in a "subdued" market, but added that increased income from rising interest rates had been "largely offset by a highly competitive mortgage market".

Its common equity tier 1 and leverage ratios increased to 27.1% and 6.5%. The net interest margin was largely unchanged at 1.56%.

The lender also said it expected the Virgin Money acquisition to complete in the fourth quarter, subject to regulatory approval.

It continued: "The tangible net asset of Virgin Money of £4.4bn is £1.5bn in excess of the acquisition price of £2.9bn and although the final figures will depend on the fair value of net assets acquired at completion, a significant gain is expected to be recognised as a result of the acquisition."

The unusual takeover of a listed bank by a member-owned building society was first announced in March. The recommended offer was put to Virgin Money shareholders on Wednesday, with investors voting in its favour.

Debbie Crosbie, chief executive, said: "We have made excellent progress delivering our new strategy. We have delivered our highest-ever member value and our strong financial performance means we can extend the ways that members benefit from our success.

"I believe this deal offers an exciting opportunity to create a more diverse business that delivers even more value to our members and will strengthen Nationwide financially."