Nationwide warns of £300m tax bill

Mr Beale said today that Nationwide had been unfairly penalised with additional bank taxes since the financial crisis.

Chief Executive Graham Beale warned that the introduction of a new tax surcharge on bank profits from next year, announced by Britain’s finance minister George Osborne last month, would have a disproportionate impact on building societies, which are smaller than major banks and focus on domestic lending.

Nationwide took a 27.5 per cent share of net UK lending in the three months to June 30 – up from 24.2 per cent a year earlier.

The estimated impact of the proposed changes to the bank levy and introduction of a tax surcharge on banking companies announced in the July budget is to increase the net tax cost to Nationwide by £300 million over the next five years.

Britain’s biggest building society said the additional tax cost was equivalent to the capital used to fund £10 billion of lending.

Nationwide reported a 52 percent increase in first-quarter underlying profit to 400 million pounds and a 50 percent rise in statutory profit to 379 million.

Graham Beale said in a results statement that changes to the bank levy announced by the UK’s chancellor, George Osborne, last month failed to recognise the contribution building societies had played in lending.

The 8% surcharge replaces the unpopular bank levy, which saw financial institutions including HSBC threaten to quit the UK, and is likely to be based on what the firms now pay in corporation tax as it is phased in over the coming eight years. The chancellor’s move to scale back the levy, which has raised £8bn since 2010, came alongside a new 8% surcharge on bank profits.

Nationwide said its core tier 1 ratio, a key measure of financial strength, rose 1 percentage point to 20.8 percent, higher than any British lender.

Its trading update comes after it suffered a technical glitch on Monday, which left some Nationwide customers unable to withdraw money from ATMs or make purchases in store.

The document also noted that the group continues to review its compliance, with ongoing and emerging regulatory matters, including consumer credit legislation.

The group was forced to apologise in June after thousands of customers were left unable to use its mobile or online banking services for two hours.

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