We're safe, says Nationwide boss

By RICHARD DYSON
Updated:

 

Two issues preoccupied the hundreds of Nationwide Building Society members who turned up for its annual meeting last Thursday - the security of their savings and the ability of Britain's biggest mutual to survive the credit crisis.

Kathleen and Tony Murphy

Keep it mutual: Members Kathleen and Tony Murphy

As one member said on arriving at Thursday's meeting at Birmingham's International Conference Centre: 'The world has changed in the 12 months since I was here last. It's become a frightening place.' Other members nodded in anxious agreement.

At the 2007 AGM, chief executive Graham Beale was upbeat, predicting modest house price growth and smooth progress for the society. But the credit crunch struck the world's markets a mere four weeks later, virtually destroying Northern Rock and forcing other, smaller lenders, such as Alliance & Leicester, to sell themselves at knockdown prices.

Kathleen and Tony Murphy, 68, know too well the effect of the credit crunch on banks - they are shareholders in Northern Rock and troubled HBoS.

Kathleen, a 64-year-old retired cashier from Kings Heath, Birmingham, said: 'I'm not worried about Nationwide. I'm just so glad it's not a bank - because I think the banks took bigger risks. I want Nationwide to stay the way it is.'

Paul Harley, 53, a consumer lobbyist from Newport, South Wales, said: 'Banks were under pressure to do high-risk business - and look where it's got them.'

This was Beale's second AGM as chief executive and he was expecting pointed questions. He got them. But first he set the scene by describing the 'extremely difficult and unstable environment' that he said 'makes it very difficult to understand what is going on'.

He stressed the society's size, profits (£781m, up from £690m), resilience, a history of cautious mortgage lending and a high degree of liquid assets.

But this did not stop some members asking questions about losses, reported in the Press, of several hundred million pounds, linked with dubious mortgage assets.

Chairman Geoffrey Howe tried to explain that these figures were not realised losses, but 'writedowns' - where the society still owned the assets and hoped to get some value from them in future.

One member wanted to know why the society's board was enjoying pay increases while there were any such potential losses. 'Who is responsible for these losses?' he stormed. 'And why is the pay of the non-executive board members up so much at the same time?'

A ruffled Howe ignored the latter question but said, perhaps rashly, that value from the investments would 'undoubtedly' be realised. This was later moderated by finance director Mark Rennison, who said: 'We cannot be sure, but we can be reasonably confident the losses will not be crystallised.'

Other members probed the figures behind the society's mortgage lending, which show an average new loan is worth a modest 60% of a borrower's home. One asked: 'How many mortgages are worth more than 90% of the home's value? I worry if house prices fall, much of this business will be ''under water''.'

Banks in crisis

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Bank profits graphic

Beale said: 'We cannot foresee any plausible scenario where the security of the business is jeopardised.' But he added: ' We expect house price falls of high single digits this year, or just outside. I have concerns in terms of pressures on borrowers.' Some members blamed the whole mortgage industry for ' getting us into this dreadful mess'.

One man said: 'This worldwide meltdown is caused by the corruption and greed of the people who run our financial institutions. Managers leave their customers in the mire without gumboots while they go off with a golden handshake.'

But Anne Hart, 62, who lives in Birmingham and works part time as an office administrator, said: 'I'm just glad my money's with Nationwide and not with some of the other banks.' Many appear to agree. Beale pointed out that Nationwide had pulled in a record £9 billion in new savings in the past year - accounting for £1 of every £5 saved.

A record 1,577,699 voted at the AGM, 21% of the membership (up from 15% last year). A donation of £250,000 was handed to Macmillan Cancer Support as a result.

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