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The largest building society in the UK has said its profits have been slashed by an “unfair” amount of contribution required for a savings protection scheme.
Pre-Tax figures from last year to April show that Nationwide profits were down 69 percent to £212m.
Nationwide has branded the £241 million contributions paid to the Financial Services Compensation Scheme (FSCS) to cover its savers for up to £50,000 as “illogical”.
Falling interest rates have also resulted in lower returns from mortgages, which were also squeezed by bad debt.
Nationwide said bad debts had caused a number of knock on effects, including a sharp rise in missed mortgage repayments, reaching £394m.
But Nationwide has said that even after everything the recession has had to throw at it, it still remains strong.
Graham Beale – chief executive at Nationwide, said that the building society was the only major banking institution in the United Kingdom to refrain from raising capital or require aid through government bailout schemes.
“This reflects a combination of our naturally high capital and prudent lending practices which are the hallmark features of a strong building society,” he said.
Nationwide said that only 0.6% of its mortgage customers were more than 12 weeks in arrears – significantly less than the figure recorded by the Council of Mortgage Lenders industry – an average of 2.39% based on figures from the end of March.
Profits were also affected after the merger between Nationwide and the Portman, Cheshire and Derbyshire building societies.
But Nationwide was unhappy with the way the FSCS had calculated the contributions.
Mr Beale said: “We regard the fact that the FSCS charge is not linked to the level of risk posed to the financial system by individual institutions, but instead is allocated by share of the retail savings market, as illogical and unfair, producing a disproportionate outcome for the low risk retail funded institutions, particularly building societies”.
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