* Underlying profit rises 117 percent to 263 million pounds
* "Natural correction" of UK house prices to continue -CFO
* Brits made 6.9 billion online banking transactions in 2013
(Adds comments from finance director, background, BBA data)
By Clare Hutchison
LONDON, Aug 18 Nationwide Building Society
, Britain's biggest customer-owned lender, more than
doubled its first-quarter profit, helped by improvements to its
balance sheet, it said on Monday.
Nationwide, Britain's third-largest mortgage lender and
second-biggest provider of saving products, also said it
expected house prices to continue to moderate over the medium
term, after showing strong growth earlier in the year and
prompting fears of a bubble.
Underlying profit of 263 million pounds ($440 million) in
the three months to June 30 was up 117 percent against the same
period last year.
Profitability at Nationwide has been steadily improving over
the last two years, after it repriced maturing longer-term fixed
rate mortgages onto higher current market rates, which boosted
margins, Group Finance Director Mark Rennison told Reuters.
It has also seen a moderation in impairment charges after
reducing its exposure to some commercial real estate, a "big
issue" for the lender, Rennison said.
It now has a core capital ratio of 16.3 percent and leverage
ratio of 3.7 percent, ahead of a target set by Britain's
As well as deleveraging, Nationwide has been 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.
It has been offering interest of 5 percent a year on some
accounts and has won customers from rivals as a result of new
rules making it easier to switch accounts.
The mutual society, which is targeting 10 percent market
share, said it accounted for 6.4 percent of the current account
market in the first quarter, up slightly from 6.2 percent.
Member deposits increased by 1.5 billion pounds to 132 billion
The big five of Lloyds Banking Group, Royal Bank of
Scotland, Barclays, HSBC and Santander
UK control about 80 percent of the market for personal
HOUSE PRICE CORRECTION
Data released on Monday by property website Rightmove showed
a prediction made by Nationwide Chief Executive Graham Beale in
May for a cooling of house prices in London over the summer had
been borne out.
After soaring earlier in the year, asking prices in London
fell for a third month, dropping nearly 6 percent between July
and August. Across the UK, prices of property coming onto the
market fell by 2.9 percent from July.
Rennison said a natural correction from the strong growth in
prices at the start of the year would probably stay in place in
the short to medium term but prices could pick up later.
"In the long term you can't get away from the fact that the
UK housing market is undersupplied. We don't see it (the
correction) being a permanent feature," he said.
It was too early to call the future of prices in London,
Rennison said, because the higher number of cash buyers and
overseas investors make it less predictable. A clearer picture
would emerge in the autumn, a more normal period for activity,
Separate data from the British Bankers' Association (BBA)
showed on Monday that British customers made 6.9 billion online
banking transactions last year, or 800,000 an hour, compared
with a total of 5 billion in 2009.
Rennison said this shift, described by the BBA as a "seismic
change" in the way customers manage their finances, has been
visible in its customers' behaviour.
"Many (customers are) choosing to transact online as a
matter of choice and convenience. We expect to see that
continue," he said.
To capitalise on the growing usage of online banking,
Nationwide has invested heavily in its digital services over
recent years, including revamping its website, providing video
conferencing with support staff and developing its mobile app.
Nationwide said it hasn't changed the provisions set aside
for compensating customers for mis-selling payment protection
insurance (PPI) and was nearing the tail end of dealing with the
National Australia Bank said on Monday it would
need to take an additional provision of at least 75 million
pounds in relation to PPI redress at its UK businesses, which
includes Yorkshire and Clydesdale bank branches.
($1 = 0.5978 British pounds)
(Reporting by Clare Hutchison; Editing by David Goodman and