Nationwide chief criticises bank levy changes as unfair on smaller lenders

Chief executive Graham Beale said the financial year had “started strongly”.

The firm added that in the first quarter, profit before tax increased to £379m from £253m a year earlier.

They say that changes to banking taxes which were announced in the Budget are going to cost them the equivalent of the capital needed to support £10bn of lending.

The government could have chosen instead to “recognize the contribution Nationwide and other mutuals make by lending to the United Kingdom economy, and the housing market in particular”.

The lender’s interim management statement for the three month period to the end of June, published today (18 August), estimated the impact of proposed bank levy changes and introduction of a tax surcharge is to increase the net tax cost to Nationwide by £300m over the next five years.

When net lending rises at a faster rate than gross lending it indicates that appetite for loan and mortgage repayments is waning.

Pre-tax profit up 50% to £379 million ($590 million).

In the summer Budget, George Osborne revealed the bank levy would gradually be reduced from 0.21 per cent to 0.1 per cent in 2021.

Nationwide is joining a chorus of smaller British lenders opposing Osborne’s tax changes, pledged last month as banks including HSBC Holdings Plc consider leaving London because of the costs of the original levy.

Beale reckons that this stance will be useful to global banks in the UK, but detrimental to building societies.

Osborne also defended the move against criticism it would hurt challenger banks, saying the UK was lowering corporation tax to one of the lowest rates in the world.

“We continued to lend through the financial crisis – we didn’t take any losses or draw on taxpayers money”, he said.

However, it warned that the proposed changes to the banking system could have a “disproportionate effect”.

But Nationwide cautioned that the group’s net interest margin was set to ease back over the rest of its financial year amid stiff competition in the mortgage market.

The group added it put by another £13 million to cover potential customer compensation claims, such as those relating to the consumer credit legislation.

Nationwide is targeting a 10% share of Britain’s personal current account market.

Nationwide said the issue was intermittent and lasted for half an hour, stressing there was a “minimal” impact on its customers.