Nationwide Building Society (LON:NBS) warned that it expects fierce competition in mortgage lending to persist and the housing market to remain “relatively subdued” as it posted a 10% decline in first-quarter profits.
The lender reported underlying profit of £270mln for the quarter to June 30, down from £301mln the same period a year ago, when results were flattered by a £26mln gain on the sale of its stake in payment systems firm Vocalink.
Gross mortgage lending increased 3.7% to £8.4bn, supported by a record 20,600 first time buyers, who took advantage of low-interest rates, reduced stamp duty and government schemes such as Help to Buy.
READ: Nationwide Building Society sees another annual profit fall amid intense competition in the home loans market
However, the net interest margin – a key measure of banks’ profitability – fell to 1.28% from 1.35% as tough rivalry in the mortgage market meant offering competitive deals.
Chief executive Joe Garner said: “The housing market looks set to remain relatively subdued with house prices broadly flat in 2018. Against this background, we also expect intense competition to persist in our core markets."
Nationwide continues to expect the economy to grow at a modest pace over the next year and is “observing consumers adapting their behaviours in response to the pressure on disposable income”.
The group is reviewing its technology strategy in response to the shift towards online banking. It is also looking at ways to cut costs, targeting savings of £300mln by 2022.