Osborne Banking Tax To Cost Nationwide £300m

George Osborne's decision to replace the bank levy with a profits surcharge will "disproportionately" hit building societies, with Nationwide expecting to be charged £300m over the next five years.

The warning comes alongside its first-quarter results which show underlying profits rising 52% to £400m.

Graham Beale, Nationwide’s boss, said: "The proposed changes to the bank levy and introduction of the tax surcharge on banking companies announced in last month’s budget may benefit UK headquartered international banks but will have a disproportionate effect on building societies such as Nationwide.

"This represents a missed opportunity to support diversity by acknowledging that building societies are different to banks and to recognise the contribution Nationwide and other mutuals make by lending to the UK economy, and the housing market in particular."

The estimated impact of the proposed changes to the bank levy and introduction of a tax surcharge on banks announced in July's summer budget will increase the net tax cost to Nationwide by £300m over the next five years.

That is equivalent to the capital required to support about £10bn of lending.

George Osborne was under substantial pressure from the larger international banks such as HSBC to reform the banking levy which had been raised eight times since it started in 2011.

The fact HSBC are currently evaluating whether or not to relocate their HQ overseas would have added further clout to the larger banks' desire for reform.

Approximately 30 banks are currently subject to the levy, but around 70% of it is paid by the big international banks with HSBC paying £710m in 2014, making it the biggest payer.

Nationwide's first-quarter results also showed signs of improving credit conditions.

Gross mortgage lending for the quarter increased 17.2% to £6.8bn, whilst net lending increased 23.5% to £2.1bn - taking total mortgage balances to £154.9bn

When net lending rises at a faster rate than gross lending it indicates that appetite for loan and mortgage repayments is waning.

Member deposits were broadly flat at £132.5bn, which is consistent with such a low interest rate environment.