UK Nationwide’s H1 profit drops 18 percent

British mutual lender Nationwide reported an 18 percent drop in its half-year profit, and said funding arrangements for the UK depositor protection scheme should be changed so that risk-averse banks contribute less.

Nationwide, the country's second-biggest mortgage lender, said its underlying pretax profit for the six months to Sept. 30 was 322 million pounds ($506 million), down from 394 million pounds in the same period last year.

Nationwide, owned by its savers and borrowers, blamed the decline in part on an increase in the rates it offers to savers as banks, faced with a continued freeze in the wholesale money markets, compete aggressively for depositors' cash.

Nationwide said it attracted 2.6 billion pounds of net retail deposits over the first half of the year, giving it an estimated 34 percent share of the market.

The increased flow of savers' money allowed Nationwide to finance its total net lending for the six months of 1.2 billion pounds through retail deposits.

Net mortgage lending fell to 1 bilion pounds from 3.6 bilion pounds a year earlier as Nationwide tightened its lending criteria in the face of a slumping property market.

Nationwide also said it planned to lobby for a review of how individual banks' contributions towards the cost of funding the UK Financial Services Compensation Scheme — used to compensate savers in the event of a banking collapse — are determined.

"It is highly regrettable that the cost of failure of banks who took on substantially greater levels of risk than we are prepared to should be borne by Nationwide's members," the lender said.

The FSCS helped underwrite the sale of Bradford & Bingley's savings and branch business to rival Abbey, a UK subsidiary of Spain's Santander, after B&B was part-nationalised in September.