LONDON, Nov 18 (Reuters) – The Nationwide Building Society said bad debts are expected to rise as strain on household finances weighs on its customers, even as it reports rising profits due to rising interest rates.
Nationwide’s results come a day after Britain’s Budget Forecasting Office warned that the country will face record living standards this year as soaring inflation erodes incomes.
In a bid to restore Britain’s finances after the chaos caused by former Prime Minister Liz Truss’s plans for sweeping tax cuts, Finance Minister Jeremy Hunt has presented a budget to save 55 billion pounds (65, $52 billion) per year.
Nationwide’s results showed the impact of this environment – inflation-fighting interest rate hikes have the effect of boosting bank profits, while increasing costs for individuals in the form of higher mortgage payments.
Britain’s second-biggest provider of home loans said profits for the six months rose 13% to £969m from the same period a year ago, but said bad debts rose and would continue to do so.
Nationwide said credit impairment charges reached £108m from a net release of £34m set aside for possible loan losses in the first half of last year.
Customers have mostly held out for now thanks to savings accumulated over the past few years, but the cracks are starting to show for some, said Nationwide chief executive Debbie Crosbie.
“The transition to higher interest payments is a challenge for households as they adjust their spending priorities,” Crosbie said.
Nationwide competes with the big UK banks but, unlike them, is owned by its customers and aims to provide them with financial benefits rather than paying excess profits to shareholders.
($1 = 0.8401 pounds)
Reporting by Lawrence White; Editing by Mark Potter and Jan Harvey
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