LONDON, Nov 18 (Reuters) – Nationwide Building Society said bad loans are likely to rise as pressure on family finances squeezes its clients, even as it reported profits rising due to rising interest rates.
Nationwide’s results come a day after Britain’s forecast office warned the country faces a record hit to living standards this year as rising inflation erodes incomes.
In a bid to restore Britain’s finances after the chaos caused by former Prime Minister Liz Truss’s plans for drastic tax cuts, Finance Minister Jeremy Hunt has set a budget to save 55 billion pounds (65.52 billion dollars) per year.
Nationwide’s results showed the impact of this environment: Interest rate increases aimed at fighting inflation have the effect of boosting bank profits, while racking up costs for individuals in the form of higher mortgage payments.
Britain’s second-biggest provider of home loans said six-month profit rose 13% to 969 million pounds from the same period a year ago, but said bad loans had risen and would continue to rise.
Nationwide said credit impairment charges rose to £108m from a net release of £34m set aside for potential credit losses in the first half of last year.
Most customers have hung on for now cushioned by the savings accumulated in recent years, but the cracks are starting to show for some, Nationwide CEO Debbie Crosbie said.
“The transition to higher interest payments is challenging for households as they adjust their spending priorities,” Crosbie said.
Nationwide competes with the big British banks but, unlike them, is owned by its customers and aims to provide them with financial benefits rather than pay excess profits to shareholders.
($1 = 0.8401 pounds)
Reporting by Lawrence White; Edited by Mark Potter and Jan Harvey
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Read More: Britain’s Nationwide Warns of Rising Bad Loans as Outlook Worsens