UPDATE 2-British lender Nationwide wins customers from scandal-hit banks

Thu Feb 20, 2014 5:45am EST

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* 9 months underlying profit 539 mln stg vs 263 mln

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By Matt Scuffham

LONDON, Feb 20 (Reuters) - Britain's biggest customer-owned lender Nationwide is picking up clients from all its big rivals, it said on Thursday, with the number of new current accounts rising by 20 percent in the nine months to Dec. 31.

Nationwide is seeking to challenge the dominance of Britain's five biggest banks, wooing customers disillusioned by scandals including the mis-selling of loan insurance and the rigging of benchmark interest rates.

However, the big five of Lloyds Banking Group, Royal Bank of Scotland, Barclays, HSBC and Santander UK continue to control more than 80 percent of the market for personal current accounts.

The mutual society said that 316,700 personal current accounts were opened during the period, up 20 percent on a year earlier, helped by new rules making it easier to switch accounts. The increase helped it to more than double underlying profit to 539 million pounds ($901 million).

Chief Executive Graham Beale told Reuters that Nationwide, which is also Britain's third-largest mortgage lender and second-biggest provider of saving products, was picking up customers from all its major rivals.

"We are punching above our weight in all of our principle market places. We're more than holding our own against the established banking models," Beale said.

Nationwide, which currently has a 6 percent share of the personal current account market, is offering interest of 5 percent a year on some accounts to entice customers and help it to reach its target for a 10 percent market share.

The lender was viewed by some analysts as the most likely beneficiary from the problems at the Co-operative Bank, which has fallen under the control of investors including U.S. hedge funds after a 1.5 billion pound capital shortfall was exposed.

SWITCHING BOOST

But Beale played down the Co-op's demise as a factor in its success and pointed to the significance of the new rules compelling banks and other lenders to ensure that customers can switch accounts within seven working days.

Seven-day switching, introduced last September, resulted in a 17 percent rise in customers moving accounts across the industry in the fourth quarter of 2013.

"We are taking customer share right across the piece. Through the current account transfer process, we are gaining three times more customers than we are losing," Beale said.

Nationwide also said it is on track to hit a key capital strength target ahead of the deadline set by the UK's financial regulator.

It raised 550 million pounds through the issue of a new type of debt to institutions in November and said that capital raising lifted its leverage ratio to 2.6 percent.

Beale said that leaves Nationwide well placed to hit the regulator's 3 percent leverage ratio target "significantly ahead" of the December 2015 deadline.

Leverage measures the amount of equity a bank holds as a percentage of its loans, without adjustments for risk. A 3 percent leverage ratio means that Nationwide can lend up to 33 pounds for each pound of capital it holds in reserve.

Beale said the bank is also considering issuing additional Tier 1 debt to bolster its capital position.

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