Nationwide – Pulling the Plug on Commercial Lending
25 November 2016 by Ties Bouwmeester
Nationwide Building Society has decided to stop lending to new and existing commercial real estate customers after concluding that its resources could be better deployed elsewhere.
Nationwide has been shrinking its commercial real estate division in recent years, taking its portfolio of assets down to £2.7bn from £13bn in 2011. It has said that its commercial real estate business is not key to its future vision, adding that withdrawal from the sector would reduce its risk profile and free up capital to reinvest in initiatives that would benefit the wider membership. Joe Garner, who joined the building society from BT Openreach in April, said the he had decided to run-off the group’s remaining portfolio to focus on savers and lending to home-owners.
Nationwide said that since the referendum “expectations for commercial property values have moderated and most forecasts are predicting modest falls”, although Mr Garner said the decision to pull out of commercial real estate would have been made regardless of the referendum. Chris Rhodes, retail director at Nationwide, said “we believe this is the right time to make this decision in the best interests of the society and its membership as a whole as we continue to place sharper focus on our core purpose of building society, nationwide. Over recent years Nationwide has worked hard to successfully reduce its financial exposure to the commercial real estate market and this is the next natural step in this process.”
The society will allow its existing commercial real estate loans to run off in line with their contractual terms over the next few years. It said it would then seek to support existing customers to achieve an orderly refinancing of their loan elsewhere. This will therefore culminate in the closure of its commercial real estate business. A consultation process is underway with affected staff and the Nationwide Group Staff Union. Nationwide has 275 employees in its commercial division, but only those which work in commercial real estate lending are impacted by this proposal.
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