S&P added that high impairments on the mutual’s commercial loan book are likely to continue for the next two years.
Nationwide reported over £450m of commercial real estate lending impairment charges in the year to April 4, 2013. On April 4, 27% of this £10.2bn gross portfolio was impaired and that 38% of gross balances were in negative equity.
“These impairment charges have hindered Nationwide’s internal capital generation. As a result, we have revised down our assessment of its risk position to “adequate” from “strong,” the analysis firm said.
It added that the negative outlook is consistent with the trend assigned to UK banking risk overall and Nationwide is the latest high street lender, including Barclays, Santander and RBS to be downgraded to an A rating.
The agency also confirmed the mutual’s £136bn gross residential mortgage book at 85% of lending performed relatively well with just 0.7% of Nationwide’s total residential mortgage book three months or more in arrears on April 4, 2013, against the 1.9% industry average.
The regulator identified a £27bn hole among eight major high street lenders with Nationwide falling £400,000 short.
In July, the Prudential Regulation Authority (PRA) accepted Nationwide’s proposition to raise capital and mitigate business risks, granting it a two year extension.
At the time, Nationwide told Mortgage Solutions that it had no plans to reduce lending.
A Nationwide spokesman said the downgrade put Nationwide in line with its peers and that its capital plan had been reviewed and approved by the Prudential Regulatory Authority. He added this followed the announcement of strong annual results in May confirming a 56% rise in underlying profits.
