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Nationwide’s H1 profit dips over PPI claims


UK's largest building society takes a hit from bad commercial loans and hedges

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Nationwide building society said its pre-tax profit for the six months to September-end was £124 million, down from £238 million a year ago.

In a statement on Tuesday, the UK’s largest building society said its income rose to £1.2 billion after healthy mortgage lending and growth in the number of current account customers.

Nationwide attributed the drop in first half in pre-tax profits to the accounting value of derivatives used to insure the business against movements in exchange rates and interest rates. A spokesperson said that in the first six months of 2011, the company made a profit on these activities of £71 million.

“However, this year we incurred a loss of £14 million,” he added.

Nationwide also announced that it had set aside a further £45 million to cover claims towards payment protection insurance (PPI) mis-selling. Its losses on commercial property loans also increased to £193 million.

Overall gross mortgage lending rose 15 percent to £10.2 billion compared with a year earlier. Of the amount, £2.5 billion was lent to first-time buyers.

The building society said it did not anticipate "any significant improvement" in the prospects for the sector until the end of the 2013-14 at the earliest.

Later in an exclusive interview with the Reuters news agency, Nationwide chief executive Graham Beale said that the building society was interested in buying the 316 branches being sold by Royal Bank of Scotland.

"Strategically we want to enter into the small and medium-sized enterprise space. If there's anything I could do that would accelerate our strategy it would be of interest. Within that context, RBS is something which we will watch very carefully," he told Reuters.

An earlier deal between Santander and RBS pertaining to the sale of the branches fell through and Beale said Nationwide needed to understand what “issues” arose before it could be “committal on the purchase.”

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Nationwide’s H1 profit dips over PPI claims
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