The Global Crisis of Credit Crunch Affects Nationwide

The largest building society of Britain "Nationwide" has seen a 40 percent drop in home loans over the past year and as the credit crunch forced it to rely on savings to fund mortgage lending, its market share has also shrunk.

London(Shakespearefinance) May 27, 2009:  Nationwide, which after its merger with Portman last year became Britain's second-largest mortgage lender, said that residential lending fell to 6.7 billion pounds in the year up to April, from 11.2 billion and the market share fell to 7.1 percent. On Thursday, Chief Executive Graham Beale said, “It compares with an 11 percent slice of the UK market in the previous year and company's "natural" share of 10-11 percent.” He also added, “Its share of prime home loans dropped from 9.2 percent to 5.2 percent.”

After the company released its annual results, Mr Beale told reporters, "Until we are confident we have normality back in the market place, in terms of our ability to fund well, we will continue to run on a cash flow model, so we will keep on to moderate our lending activities."

"If we are in 7 percent (market share) territory, we would not be ill at ease with that in current market circumstances," said Beale.

Last month, after Nationwide published the first annual decline in house prices in 12 years, Beale said he saw the drop in the prices of UK property in the year 2009 remaining within a single-digit percentage. However, the conditions of market in the housing and mortgage markets are expected to remain "low-keyed".

The company said it had begun to shift to a more prudent policy early in the year after expanding aggressively in 2007, but as wholesale markets dried up and it turned to savings, net lending fell away most sharply in the second half.

The 8.9 billion pounds of total net lending (including the commercial lending) of Nationwide was covered by retail deposits of 9.1 percent, It took a 19 percent share of the savings market as it was being benefited from the "flight to quality" after the near-collapse of loan provider named Northern Rock.

Beale also said that Nationwide had seen mortgage arrears edge up to 0.36 percent from 0.31 percent, however it's below an industry average of 1.2 percent and it was occurred largely due to the merger with Portman company.

The underlying pre-tax profit of the Nationwide company rose from 669 million during the previous year to 781 million pounds.