Nationwide Building Society, the UK's biggest customer-owned lender, said first-half profit fell 62 per cent because of increased provisions for impairments and lower margins caused by record low interest rates.
Net income dropped to £102 million sterling, from £270 millio a year earlier, the Swindon-based company said today in a statement.
Impairment charges on loans more than tripled to £317 million. "Our performance has been substantially affected by the low interest rate environment and the dramatic fall in commercial property valuations," said chief executive Graham Beale said in the statement.
"We expect the remainder of this year and next to present a very difficult trading environment."
Nationwide has added customers with the takeover of other lenders, including the Derbyshire and Cheshire building societies, that struggled with bad loans and higher funding costs during the credit crisis.
Nationwide in May said its profit margins would come under pressure this year from "aggressive" state-owned competitors.
Building societies, which account for about 18 per cent of the mortgage market, are also under pressure from increasing defaults as unemployment rises. UK house prices have fallen 13 per cent since the October 2007 peak, according to the Nationwide house price index.
Bloomberg