Newspaper article The Evening Standard (London, England)

Our Banks Need to Change --and the Feeling's Mutual

Newspaper article The Evening Standard (London, England)

Our Banks Need to Change --and the Feeling's Mutual

Article excerpt

Byline: Nick Goodway

ON the face of it a 69% fall in annual pre-tax profits or even the slightly more modest 50% drop in underlying profits by Nationwide does not immediately present itself as the strongest argument for mutuality.

On a closer look, the case is made even worse by the fact that those underlying profits for the year -- which matches the tax year -- dropped from [pounds sterling]322 million in the first half to just [pounds sterling]71 million in the second half.

But the fact is that Nationwide, which hasn't taken a penny of Government bailout money or guarantees, still made a profit. That's more than be said for many of its rivals, like Royal Bank of Scotland and HBOS, which lost billions of pounds last year.

It's going to be even harder for any of the banks to make money in the coming months, as Nationwide's Graham Beale made clear. What is even more evident from Beale's comments to me is that the collapse of Lehmans had far greater and more immediate impact on the British consumer than many people had imagined.

In the six months up to Lehmans' demise last September Nationwide had been powering ahead, capturing just over a third of the UK savings market, largely at the expense of its High Street banking rivals. In the next six months to the start of April its savings inflow went into reverse, as scared punters opted for the absolute safety of Government guaranteed homes like National Savings and a nationalised Northern Rock.

Beale is right to say that the Government's unlimited guarantee on savings, versus a guarantee limited to [pounds sterling]50,000 for most other banks and building societies, means he cannot compete. He modestly says that an immediate rise in the limit to [pounds sterling]100,000 would be a good start.

I'm not convinced that would be enough. Especially since Nationwide is already paying more than its fair share into the current Financial Services Compensation Scheme based on its share of the consumer market, which is high, as against its exposure to bad debts -- well below the industry average. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.