The credit crunch continues to wreak havoc across the global financial markets and Nationwide Building Society is just one of the major UK institutions to have been affected by the fallout.
Nationwide's latest financial results show that underlying pre-tax profit for the year ending April 4 was up 17 per cent year-on-year to £781.1 million compared with £668.6 million in the prior-year period. Net interest income rose 21 per cent to £1.8 billion compared with £1.5 billion in the 2007 period.
lending took a major hit, with net residential mortgage lending falling 40 per cent from £11.2 billion in the 2007 period to £6.7 billion for the year ended April 4, 2008. Its share of the UK mortgage market fell from 11 per cent to 7.1 per cent.
Meanwhile, investment in risky structured investment vehicles (SIVs) led to a £102.2 million loss for the segment. Its investment
portfolio showed that its value had dropped £726.3 million before tax. Although it claims its assets are unaffected, liquidity issues appear to be behind the decline.
Despite this, Nationwide's chief executive, Graham Beale, remained positive. He said: "Nationwide has delivered a strong performance in a challenging year during which the industry has faced unprecedented market conditions.
"Our consistently prudent approach to lending over a number of years during which we have focused on quality rather than volume, means our arrears remain at very low levels, and are less than a third of the industry average."
"The society is conscious of the difficulties faced by consumers in these disrupted market conditions and we are playing our part to help by continuing to focus on offering mortgages that meet the needs of both existing members and first time home buyers."
He also welcomed the Bank of England's special liquidity scheme, through which lenders will be able to swap risky mortgage-backed assets for Government bonds. "This should ease increased funding costs and contribute towards the recovery of more normal market conditions," he said.