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Nationwide Profits Fall On 'unfair' Saver Scheme

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http://business.timesonline.co.uk/tol/busi...icle6370057.ece

Nationwide Building Society today announced a 69 per cent fall in pre-tax profits to £212 million and criticised the high cost of the Government’s scheme to guarantee savers’ funds as "illogical and unfair".

The building society blamed its fall in profits on a combination of low interest rates, the cost of holding additional liquidity during a recession and the high charges it had to pay the Financial Services Compensation Scheme (FSCS) - the fund of last resort that guarantees savers up to £50,000 if a bank or building society fails.

Unlike many banks, Nationwide has not sought to raise capital nor applied for government aid - although its provisions for bad debts have soared from £106 million to £394 million over the past year.

Graham Beale, chief executive of Nationwide, said that he was angered by the £241 million in levies the building society had had to pay to the FSCS. He said profits were 53 per cent lower than they could have been because of the charge.

FSCS levies are exceptionally high after the failure of several banks and financial institutions triggered a series of claims against the scheme in the past year.

He said: "We regard the fact that the FSCS charge is not linked to the level of risk posed to the financial system by individual institutions, but is instead allocated by share of the retail savings market, as illogical and unfair."

He said he had lobbied Government for an increase in the FSCS limit from £50,000 to "at least £100,000" to "reassure savers with independent institutions that they have similar protection as those with Government owned, nationalised and part-nationalised banks." He said they had the backing of 173 cross party MPs.

In the past year the building society has merged with Portman, The Derbyshire and The Cheshire building societies and acquired assets from the Dunfermline Building Society increasing assets by 13 per cent to £202.4 billion compared to last year.

Mr Beale added: "Despite the challenging environment an estimated £680 million benefit has been provided to members in the year through competitive interest rates and lower fees and charges."

In its statement today the building society said: "This set of results demonstrates a resilient performance in an exceptionally difficult market place.

So they have a resilient performance, how long before they need a taxpayer bailout?

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http://business.timesonline.co.uk/tol/busi...icle6370057.ece

So they have a resilient performance, how long before they need a taxpayer bailout?

I've spread my dosh about well to keep within FSCS guarantee limits but I still feel a little safer with Nationwide than RBS or A & L.

If, I mean when another bank was to fail we wouldn't know till it was too late anyway.

Next one to fail IMO, Newcastle BS. Shame they have no shares to short-sell :o

Edited by gotoutintime

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this report is nonesense.

most of the figures are in Millions, not the current worth reporting Billions.

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They are being punished by the Government for their prudence, disproportionally bailing out the ceckless funts.

Champagne socialism for the wasters.

Should have blown it all and demutalised along with Northern Rock, Bradford and Bingley, etc etc.

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They have a point, this is effectively a tax on savings, it should be the other way round (or at least modified), contributions to the fund should be based on the debt load, or related to gearing, the riskier you want to be the more you pay as the more like ly you are to default on paying the deposits back.

Other than that, those in the lending cartel are no better than all mp's in regard the expenses question. This situation exists because they kept their traps shut during the bubble.

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They have a point, this is effectively a tax on savings, it should be the other way round (or at least modified), contributions to the fund should be based on the debt load

That wouldn't be socialist. The Nationwide is comparatively well off, so it should be screwed.

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Why will Newcastle BS. be next to fail?

Maybe something to do with the percentage of it's assets that are BTL and Commercial Property loans. :blink:

Also mentioned "IMO", referring to if there was odds being offered on a financial institution failing I think Newcastle BS would be at or near the top of the list. Let's face it, quite a few more banks/BS's could fail but they will probably be bailed out with taxpayer's money, never mind I don't pay taxes anymore.

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this report is nonesense.

most of the figures are in Millions, not the current worth reporting Billions.

Not so, it shows the contribution vs the profits, but as a mutual they don't really need to make profits, instead they ought to pay out via better savings rates. The Nationwide saving rates are lamentable, and this is a tax on those who chose the less exciting saving rates from Nationwide to the benefit of those who took substantial risk with Icesave and enjoyed the higher interest rates from those dodgy banks. Those of us sensible enough to spot that the Icelandic (and NR, etc.) were offering rates too good to be true, and saved with the low risk institution are bailing out those who ought to have lost every penny.

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Not so, it shows the contribution vs the profits, but as a mutual they don't really need to make profits, instead they ought to pay out via better savings rates. The Nationwide saving rates are lamentable, and this is a tax on those who chose the less exciting saving rates from Nationwide to the benefit of those who took substantial risk with Icesave and enjoyed the higher interest rates from those dodgy banks. Those of us sensible enough to spot that the Icelandic (and NR, etc.) were offering rates too good to be true, and saved with the low risk institution are bailing out those who ought to have lost every penny.

Oh no I agree, with you, it was my failed attempt to be "humourous" about the small sums involved in one of our largest remaining independent BS.

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Maybe something to do with the percentage of it's assets that are BTL and Commercial Property loans. :blink:

Also mentioned "IMO", referring to if there was odds being offered on a financial institution failing I think Newcastle BS would be at or near the top of the list. Let's face it, quite a few more banks/BS's could fail but they will probably be bailed out with taxpayer's money, never mind I don't pay taxes anymore.

Thanks for replying.

I'm aware that Newcastle has been downgraded, along with a few other Building Societies, however most of them appear to be in a similar situation.

Apart from Nationwide, NS&I and perhaps NR, where is the best place to keep savings today?

I'd rather not keep savings under the mattress!

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Thanks for replying.

I'm aware that Newcastle has been downgraded, along with a few other Building Societies, however most of them appear to be in a similar situation.

Apart from Nationwide, NS&I and perhaps NR, where is the best place to keep savings today?

I'd rather not keep savings under the mattress!

For Sterling and safety it has to be HSBC (but crappy rates) after the 3 you mention, I also hold US Dollars alongside Sterling and get $500,000 FDIC coverage by naming my accounts "in trust for" (payable on death to) then names of family members. FDIC normally pay out immediately if a bank fails, hope I haven't spoke too soon!

It would be good if the FSCS did this as well.

Edited by gotoutintime

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Perhaps if they hadn't been so instrumental in bleating about lowering house prices, the BoE base rate might not have been cut to 0.5%, thereby ensuring they could at least have held tracker mortgages at a profit. The Nationwide's saving interest rates are not greatly competitive so they lost my loyalty.

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The eminently sensible riposte to this whinging involves necessary security for judges during crime trials, and also the question of highly sensitive documents and other material, which might go astray if you just kept it in a hotel room.

It's almost as if Gordon's handlers want to see the end of the mutual model in its entirety.

It's not so easy taking down the opposition when there are no shares to short into oblivion.

Edited by Red Kharma

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Perhaps if they hadn't been so instrumental in bleating about lowering house prices, the BoE base rate might not have been cut to 0.5%, thereby ensuring they could at least have held tracker mortgages at a profit. The Nationwide's saving interest rates are not greatly competitive so they lost my loyalty.

Margins are wider, it's just that new business is down.

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The Nationwide used to be one of the best but they are just annoying now. They almost seem to take the view they're doing you a favour by letting you have an account with them and their interest rates are lamentable.

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The Nationwide used to be one of the best but they are just annoying now. They almost seem to take the view they're doing you a favour by letting you have an account with them and their interest rates are lamentable.

Agree, as soon as there are viable and trustworthy alternatives then they are going to be in trouble. At the moment banks and mutuals are just taking advantage of the situation that there are no alternatives. Properly capitalised foreign banks servicing growing economies elsewhere might make mincemeat of the savings in this sector at some point down the road. Spread of currencies and better rates would be highly attractive.

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http://business.timesonline.co.uk/tol/busi...icle6370057.ece

So they have a resilient performance, how long before they need a taxpayer bailout?

They are the ones doing the bailing out so far.

Perhaps they should tell the government "no more rescues by us until you reform the levy system to be proportionate to risk".

Or perhaps they should already have used that particular lever...

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Agree, as soon as there are viable and trustworthy alternatives then they are going to be in trouble. At the moment banks and mutuals are just taking advantage of the situation that there are no alternatives. Properly capitalised foreign banks servicing growing economies elsewhere might make mincemeat of the savings in this sector at some point down the road. Spread of currencies and better rates would be highly attractive.

Who's to say that the market conditions supporting the emergence of viable/trustworthy alternatives won't change the offerings of current players?

Too much money has been lied into existence, with too few genuine investment opportunities now that the synthetic ones have been exposed as shams -- where's the wealth supposed to come from to pay high rates (and why don't disgruntled savers jump on those opportunities, whatever they might be?)

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it seems to me that a bigger reason for the drop in profits is increasing their bad debt provisons by £300M which is a quadrupling

the anger about FCSC may be a smokescreen

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a resilient performance

"Resilient" is not a word to be recommended using these days in a statement needed to be taken seriously.

It's the word used so often by you know who about the UK economy in recent years.

It's getting a bit like the word "brilliant" used to describe a tory Chancellor not long before he lost his job or the words "full confidence" used before football managers are sacked.

Edited by billybong

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it seems to me that a bigger reason for the drop in profits is increasing their bad debt provisons by £300M which is a quadrupling

the anger about FCSC may be a smokescreen

If I went into a casino, won £800, then lost £400, then got mugged for £200 of my remaining winnings to compensate people who'd gone bust at the tables, would my anger about the mugging be a smokescreen?

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If I went into a casino, won £800, then lost £400, then got mugged for £200 of my remaining winnings to compensate people who'd gone bust at the tables, would my anger about the mugging be a smokescreen?

it depends how much you're using it trying to hide from other people your stupidity/embarassment at losing the £400

Edited by newdman

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