While many mortgage lenders have been struggling to grow market share, Nationwide is expected to show impressive leap
Nationwide Building Society, the UK's largest mutual, is expected to have some good news, and some not so good news for investors according to reports in The Times. It’s aggressive pricing and relaxed loan-to-income (LTI) criteria have allowed the mortgage lender to effectively take market share from high street competitors, cementing its position as a key player in the home loan market.
The giant lender is, however, expected to announce a slight decrease in underlying profits on Wednesday, from the £1.26 billion recorded last year for the six months ending September 30. Nationwide's overall performance has been substantially buoyed by robust activity in the mortgage market. Industry insiders attribute this success to its competitive pricing and enhanced retention rates, which have encouraged borrowers to stick with the mortgage lender when their fixed-rate deals expire.
The society has also gained traction by easing lending restrictions, offering 95% mortgages to higher-income borrowers with LTI ratios of up to six times their earnings—well above the standard cap of 4.5 times. Additionally, Nationwide has grown its share in the first-time buyer market, capitalising on demand for affordable home loans.
Mortgage rates saw some relief following a Bank of England base rate cut in August, but they have since inched upward again due to persistent inflation and rising gilt yields. Despite these challenges, Nationwide has maintained its competitive edge in the sector.
Under CEO Debbie Crosbie's leadership, Nationwide has not only done well with mortgages, but has also made strides in growing its deposit base and current accounts. The mutual’s strategy to attract new customers includes offering £100 annual Fairer Share payments to core account holders and incentives such as cashback and Just Eat vouchers for students. These moves are expected to drive significant growth in new account openings.
The mutual has already begun a hiring spree, taking on around 500 new employees in customer service and tech operations according to reports over the weekend in the Sunday Mail.
Nationwide’s recent £2.9 billion acquisition of Virgin Money, completed in early October, has significantly reshaped the UK lending landscape. The deal, which valued Virgin at a steep discount to its book value of £4.4 billion, is expected to yield an accounting profit of up to £1.5 billion. This non-cash gain, stemming from the difference between the purchase price and the fair value of Virgin’s assets, will help offset Nationwide’s reduced capital ratio due to the integration of Virgin’s risk-weighted assets.
By acquiring Virgin Money, Nationwide has leapfrogged NatWest to become the UK’s second-largest mortgage provider, trailing only Lloyds Banking Group. Virgin brings with it £93 billion in assets, which join Nationwide’s £271.9 billion portfolio, solidifying the mutual’s position as a dominant force in the lending market.
For Debbie Crosbie, the Virgin Money acquisition marked a return to familiar territory. Before joining Nationwide, Crosbie spent more than two decades with CYBG, the former parent company of Clydesdale and Yorkshire Banks, which later rebranded as Virgin Money. Her experience with Virgin’s operations provides valuable insight as she oversees the integration of the two businesses.
