Nationwide Building Society, the largest in Britain, has announced plans to distribute approximately £385 million directly into customers’ accounts following a successful financial year driven by higher interest rates.
On Thursday, Nationwide confirmed that its board had approved a £100 “Fairer Share” payment to be made next month to 3.85 million eligible customers with a savings account or mortgage.
This announcement comes as Nationwide reported a pretax profit of £1.78 billion for the year ending 4 April. Although this represents a 20% decline from the previous year’s record high of £2.23 billion, it remains significantly higher than the £1.6 billion profit recorded in 2022.
Nationwide attributed the profit decline to its decision to offer better interest rates to savers, thus delivering greater value to its members. Unlike listed banks that distribute excess capital to shareholders through dividends and buybacks, mutually-owned building societies like Nationwide reinvest in their business or provide members with enhanced rates on savings and loans.
Over the past year, Nationwide delivered a “member financial benefit” worth £1.85 billion, reflecting the additional interest paid compared to market averages. This is an increase from £1.05 billion in the previous year. Last June, the “Fairer Share” payment saw £344 million distributed to around 3.4 million eligible members.
Higher interest rates since the Bank of England began increasing borrowing costs in December 2021 have boosted lending income for Nationwide and other financial institutions. Nationwide’s net interest income for the past 12 months was £4.45 billion, slightly down from the previous year. The net interest margin remained stable at 1.56%, compared to 1.57% the prior year.
However, fierce competition in the mortgage market has offset the benefits of higher rates, with Nationwide’s gross mortgage lending dropping 22% from £33.6 billion to £26.3 billion over the year.
With the housing market sluggish and the central bank expected to cut rates this summer, lenders face pressure to offer more attractive deals, squeezing their margins.
Nationwide noted that while mortgage activity is likely to remain subdued in the near term due to affordability pressures, these should ease over time if income growth remains steady and mortgage rates moderate.
The building society also saw member deposits rise by £6.1 billion to £193.4 billion, bolstered by a market-leading £200 current account switching bonus at the end of last year, which attracted over 163,000 new customers.
Nationwide is launching a new £200 current account switch offer for existing members as of 31 March who do not currently use the society for their everyday banking. Additionally, it unveiled a competitive bond exclusively for members, offering a 5.5% interest rate for 18 months.
Chief Executive Debbie Crosbie commented, “We delivered our highest ever member value and our strong financial performance means we can extend the ways that members benefit from our success. We provide our members and customers with great value products, choice in the way they bank with us, and simply brilliant service.”
Nationwide is also finalising a significant £2.9 billion acquisition of Virgin Money, which was approved by Virgin Money shareholders on Wednesday. This move marks Nationwide’s entry into the business banking market, allowing it to diversify beyond interest rate-sensitive savings and mortgages. The transaction is expected to be completed in the fourth quarter of this year following regulatory approval, with potential gains of up to £1.5 billion from the acquisition.
