Nationwide unveils SME lending plan

The move comes at a time when SME lending remains under the spotlight following pressure on Britain’s top five banks to provide more credit to struggling businesses.

Nationwide confirmed the plans as it revealed a 10 per cent rise in underlying profits to £304m on a 10 per cent rise in underlying income to £2.1bn.

Nationwide chief executive Graham Beale has previously said that SME lending would be a “good strategic fit” for the building society - but corporate customers should not expect loans to be available until late next year.

“We’re already a lender to the commercial real estate sector, we’ve been asked by customers to provide them with a corporate lending facility,” he said. “We just feel it’s a natural extension of what we can do.”

He added: “We’re quite confident there’s sufficient demand.”

The Project Merlin agreement last year was drawn up between the Government and banks in a move designed to boost lending to SMEs.

Lloyds Banking Group, Royal Bank of Scotland, Santander UK, Barclays and HSBC agreed with the Government to increase lending available to SMEs to £76bn and boost lending available to all businesses to £190bn.

The final figures confirmed that the five banks missed gross lending targets for small businesses last year by more than £1bn but beat the target for all businesses by £24.9bn.

Meanwhile, the building society said it increased gross mortgage lending by 44 per cent to £18.4bn in the year to April 4 in a market which grew only five per cent.

More than 24,000 first-time buyers took out a mortgage with Nationwide in the period, compared to 22,200 the previous year.

The building society maintained its Base Mortgage Rate pledge, which has seen many borrowers revert to a rate capped at two per cent above the Bank of England’s 0.5 per cent base rate.

Nationwide said it estimates the cost of the pledge has been in the region of £750m over the past year, equating to an average of more than £1,000 net benefit for each account per year.

Nationwide is the second largest savings provider in the UK, with net savings receipts for the year up 67 per cent at £1bn, while new sales of debit cards, credit cards and personal loans were up 13 per cent at 828,000.

The group said it had increased the charge set aside to cover the cost of payment protection insurance mis-selling claims by £103m, on top of £16m set aside in the previous year.

Its bad debt charges were broadly flat at £428m, with a rise in commercial lending provisions being largely offset by an improvement in retail lending charges.

The building society said it had no direct sovereign exposure to struggling eurozone countries Portugal, Ireland, Italy, Greece and Spain.