Pre-tax profits at Nationwide (NBS.L) fell 40% to £309m in the six months to the end of September, after the building society was forced to set aside another £36m to cover potential payouts in the payment protection insurance (PPI) scandal.
Nationwide said that PPI-related enquires “rose significantly” prior to the August claims deadline.
The building society also pointed to lower net interest income — due to increased competition and the low interest-rate environment — and a “modest increase” in administrative expenses for the profit plunge.
“In line with experience across the industry, the society received a higher than anticipated volume of PPI complaints and enquiries in the period immediately before the PPI deadline of 29 August 2019,” Nationwide said in its half-year results.
The building society had warned in September of the increase in PPI-related provisions, and the news comes in the wake of a series of other banks being hit with similar charges.
While banks are still not aware how many customers they will have to compensate as part of the PPI scandal, most of them have been estimating the overall level of compensation based on the number of enquiries they have received from those affected.
Around 64 million PPI policies, which customers were told would help them repay debts in the event of illness or unemployment, were improperly sold in the UK.
The small print of these PPI policies meant that customers would never be able to actually make a claim.
The £36m for the six months up to 30 September brings the cumulative cost of PPI for Nationwide to £473m.
The building society said income was lower because Nationwide prioritised its members’ interests over short-term profits.
“Our profits were lower as we invested in meeting the needs of our members, in our service and in our future,” said Nationwide CEO Joe Garner on Friday.
Nationwide has chosen to pay above the market rate for savings, something that lifted customer deposits by 2%, to £156.5bn.
Its share of the current account market also jumped slightly, but mortgage lending fell by more than 10% compared to the same period a year ago.
Net lending overall fell by more than 15%.