Government’s bank tax a ‘missed opportunity’, Nationwide boss says
- Credit: PA
Nationwide slammed the Government’s new bank tax as it warned the changes will cost it an extra £300 million over the next five years.
Britain’s biggest building society said the additional tax cost was equivalent to the capital used to fund £10 billion of lending.
Nationwide chief executive Graham Beale said the changes to the existing bank levy and new 8% bank surcharge, which were announced by Chancellor George Osborne in last month’s summer budget, would help international banking groups, but unfairly impact building societies.
“This represents a missed opportunity to support diversity by acknowledging that building societies are different to banks and to recognise the contribution Nationwide and other mutuals make by lending to the UK economy, and the housing market in particular,” he said.
He said the Government should have lowered the rate of the new surcharge for mutuals, or entirely scrapped the bank levy for the building society sector.
His comments came as Nationwide reported a 52% hike in underlying pre-tax profits to £400 million for its first quarter to June 30.
On a bottom line basis, pre-tax profits rose 50% to £379 million.
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Nationwide said its net mortgage lending - gross lending, less repayments - surged 23.5% to £2.1 billion in the three months, meaning it accounted for more than a quarter of net lending in the UK.
The mutual is the latest in a line of lenders to hit out at the Government’s new banking surcharge, with Yorkshire Building Society and challenger banks such as TSB among those to have criticised the move.
Mr Osborne is introducing a new 8% bank surcharge on lenders’ profits above £25 million, which will largely replace the existing bank levy by 2020.
From 2021 the levy, which will be set much lower than its current rate, will only apply to UK rather than group balance sheets.
Mr Beale said Nationwide had been unfairly penalised with additional bank taxes since the financial crisis.
“We continued to lend through the financial crisis - we didn’t take any losses or draw on taxpayers money,” he said.
But he stressed the financial impact of the bank tax changes will not impact the group’s ability to lend.
The group took a 27.5% share of net UK lending in the three months to June 30 - up from 24.2% a year earlier.
Its trading update comes after it suffered a technical glitch on Monday, which left some Nationwide customers unable to withdraw money from ATMs or make purchases in store.
Nationwide said the issue was intermittent and lasted for half an hour, stressing there was a “minimal” impact on its customers.
The group was forced to apologise in June after thousands of customers were left unable to use its mobile or online banking services for two hours.
Nationwide’s latest trading update showed the group was boosted by lower funding costs and a further decline in provisions for liabilities and charges.
But it cautioned the group’s net interest margin was set to ease back over the rest of its financial year amid stiff competition in the mortgage market.
It also said its share of the current account market remained at 6.8%, despite benefiting from the new current account switching service, gaining 7.4% of switchers.
The group added it put by another £13 million to cover potential customer compensation claims, such as those relating to the consumer credit legislation.