Nationwide bounces back

Nationwide, Britain's biggest building society, has bounced back from a difficult couple of years with an 8.5% increase in annual pre-tax profits and a bigger than expected share of the mortgage market.

It is still far short of a couple of years ago when pre-tax profits were close to £500m, but the annual results, published yesterday, show an increase in pre-tax profits for the 12 months to April 4 from £325.7m to £353.3m.

Nationwide's net mortgage lending grew from £5.5bn to £7.3bn over the same period, reflecting last year's housing boom which the mutual's surveys say is past its peak. Its overall share of the mortgage market rose to 8.8%, up 3.1% on the previous year and well above its natural market share of 8%.

There was also a strong performance on savings and current accounts. It snapped up 400,000 current account customers from the banks and a 10.4% share of new savings.

Chief executive Philip Williamson said the results were better than expected and that a change of strategy on mort gages and more effective "cross-selling" of products such as general insurance and credit cards had contributed to the turnaround.

"Our financial performance has exceeded our expectations. We really are punching above our weight, in particular in current accounts, credit cards and investment products." Nationwide ran into trouble in 2001 when it took a gamble by deciding to abandon low-rate mortgage deals for new customers at the expense of established borrowers.

The move meant an end to competitive discounted rate loans and involved Nationwide's shifting 600,000 borrowers to its new lower standard variable rate.

The troubles continued into early 2002 when it decided to spend £90m on reimbursing another 400,000 borrowers after a ruling by the financial services ombudsman in favour of a customer who had been left stranded on the society's old variable mortgage rate. "We have made great progress in the past year on mortgages in particular," Mr Williamson said. "We changed our strategy and we are retaining more customers."