LONDON (Reuters) - Nationwide, Britain’s biggest customer-owned lender, said first-half profit more than doubled and it was picking up business from all major competitors, rejecting suggestions that problems at rival Co-op showed mutuals could never take on top banks.
Confidence in customer-owned businesses took a knock after a 1.5 billion pound ($2.4 billion) capital shortfall was exposed at Britain’s Co-operative Bank, resulting in it falling under the control of U.S. hedge funds.
Former Co-op boss Peter Marks also told a committee of lawmakers he thought it would be difficult for a mutual business to be a serious competitor to retail banks such as Lloyds, HSBC, RBS and Barclays.
However, Nationwide chief executive Graham Beale said on Friday the group’s performance showed that view was wrong.
“There are some rather silly things being said. When you look at our numbers from any angle we are more than a match for the established banks,” he told Reuters.
Nationwide, Britain’s third-biggest mortgage lender, said it made an underlying profit of 332 million pounds ($534 million) in the six months ended September, up from 130 million the year before.
Beale said Nationwide was picking up customers from all of its competitors, with 214,000 new current accounts opened during the period, up 16 percent on the six months before. Some 54,000 existing customers who use Nationwide for other services have moved their main current account to the group, he added.
Beale said the number of customers moving to it had increased by nearly 50 percent since rules enabling them to switch accounts in 7 days were introduced in September.
When the publicity around the new rules fades, he forecast the number of customers switching to settle at a level about 10 to 15 percent higher than previously.
Beale said Nationwide was well placed to pick up some of the Co-op’s 4.7 million customers, who were drawn to it because of its perceived ethical focus and are unhappy with its new ownership. He said the group may prove a more palatable alternative than mainstream high street banks, which have been hit by numerous scandals.
“I’m not sure that we are recruiting too much new business from the Co-op at this stage but I think people who are minded to move are typically coming to Nationwide rather than going elsewhere,” he said.
Nationwide is offering interest of 5 percent a year on some current accounts to entice customers and help it meet a target to have a 10 percent share of the overall market. Beale said it would take until 2020 to hit that goal. Nationwide’s share rose to 6 percent in the first half from 5.2 percent the year before.
The group’s gross mortgage lending rose by 37 percent to 14 billion pounds and deposit balances increased to 5.4 billion pounds. Beale said the group was on track to meet a target set by Britain’s financial regulator for it to have a 3 percent leverage ratio by 2015. It currently stands at 2.3 percent.
The group will raise between 300 million and 500 million pounds through the issue of loss absorbing debt in the next 18 months, Beale said.
He also said the government’s “help to buy” programme for the housing market should be carefully monitored to ensure it doesn’t create a market bubble in London and the south east.
Editing by Steve Slater and Mark Potter