Nationwide Building Society said it expects fierce competition in the mortgage lending market to continue to squeeze margins as it reported a 17% drop in full-year net profit.
In the year to April 4, the mutually-owned group's net interest margin (NIM) – the difference between what it earns from lending and what it pays for deposits – fell to 1.31% from 1.22% last year. Net interest income decreased by 3% to £2.9bn due to lower mortgage income.
READ: Nationwide Building Society posts 21% drop in nine-month profits, weighed by further technology investment costs
Nationwide warned that the tough competition that had driven down its NIM was likely to persist.
“We expect our core mortgage and savings markets to remain competitive, with a continued narrowing of our net interest margin, and will continue our focus on delivering good long-term value for borrowers and savers,” said chief executive Joe Garner.
Despite the tough competition, Nationwide's net new mortgage lending jumped by 50% to £8.6bn for the year.
The lender’s overall net profit fell to £618mln, reflecting charges for investment in technology and asset write-offs. It plans to spend £1.3bn on improving its digital services over the next five years as more consumers switch to online banking.
The building society improved its common equity tier 1 ratio – a measure of capital strength – to 32.4% at the end of the fiscal year, up from 30.4% a year earlier.
Separately, Nationwide announced that it chief financial officer, Mark Rennison has decided to retire after 12 years in the role. It said Rennison has agreed to stay in position until a successor has been appointed.