Nationwide Building Society has revealed a 40% plunge in half-year profits, after taking a hit from payment protection insurance and ramping up investment despite tough market conditions.
The mutual posted pre-tax profits of £309 million for the six months to September 30, down from £516 million a year earlier.
Underlying pre-tax profits dropped 33% to £307 million, down from £460 million a year ago.
It booked a £36 million additional payment protection insurance (PPI) charge for compensation, after a last-minute surge in claims before the August 31 deadline, taking its total bill for the half year to £52 million.
Joe Garner, chief executive of Nationwide, said the group continued to “prioritise our members’ interests over short-term profits”.
Our profits were lower as we invested in meeting the needs of our members, in our service and in our futureJoe Garner, Nationwide chief executive
He said: “Our profits were lower as we invested in meeting the needs of our members, in our service and in our future.
“As we announced in September, profits were also affected by an additional PPI charge.”
He added: “We continued to grow our mortgages, deposits and current accounts, but at a more moderate pace, as we focus on broadening relationships with our members and helping to meet more of their financial needs.”
Nationwide has been investing to update and improve its IT as well as revamping branches, having upgraded 150 since 2017 and another 28 in the last six months.
The group also said it had taken the decision to pay above the market rate for savings, which has helped boost member deposits by 2% to £156.5 billion.
It also improved its share of the current account market, to 8.1% from 8% in March, which contributed to the deposit increase.
But gross prime mortgage lending fell to £13.1 billion from £15.2 billion a year ago, as competition among lenders took its toll.
Net lending dropped to £3 billion from £3.6 billion a year ago.
The mortgage market has been affected by more than a decade of low interest rates, as well as the introduction of ring-fencing rules about a year ago to separate retail from investment banking, which has sparked competition on rates.
Nationwide also confirmed it remained on track to launch its business banking offer for small businesses in 2020.