In Nationwide’s interim management statement covering its first quarter of its financial year – April to June – Graham Beale said the effect of the proposed changes would increase the building society’s net tax cost by an estimated £300m over the next five years – equivalent to £10bn worth of lending.
Chancellor George Osborne announced planned changes to the bank levy in his most recent Budget, which will be removed gradually and replaced by an 8% tax on banking institutions’ profits from January. The bank levy will be cut over the next six years, from the current rate of 0.21% to 0.1%.
Beale lamented the government’s failure to acknowledge building societies as different to banks, which he said represented ‘a missed opportunity’.
Nationwide explained the phasing to the bank levy amendments would mean that the financial impact on the lender would be larger in earlier years.
“The proposed changes to the bank levy and introduction of the tax surcharge on banking companies announced in last month’s budget may benefit UK headquartered international banks but will have a disproportionate effect on building societies such as Nationwide,” Beale said.
“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.”
Gross mortgage lending at Nationwide in the three months to 30 June 2015 increased to £6.8bn, compared to £5.8bn in the previous quarter. Nationwide now has a market share of 13.1%, up from 11.4% during the final quarter of its financial year. However, it has failed to regain its gross mortgage market share of 15.4% seen during the same period in 2013.
Nationwide added that evidence of increased competition within the mortgage market was likely to impact its margin over the remainder of the year.
However, its overall financial performance jumped in the first quarter, as underlying profit before tax increased 52% to £400m, while statutory profit before tax rose 50% to £379m.
Its interim statement also showed the credit quality of its mortgage portfolio remained stable, with the proportion of residential accounts greater than three months in arrears dropping from 0.49% in the lender’s final quarter to 0.47% in Q1.
