Nationwide Building Society said that its planned entry into the UK commercial banking sector is no longer viable commercially due to the impact on its operations by COVID-19
A branch of Nationwide Building Society in the UK. (Credit: Betty Longbottom / Nationwide Building Society - Darley Street / CC BY-SA 2.0)
Nationwide Building Society has dropped plans to foray into the UK business banking market, citing the need to prioritise its efforts in supporting its members from the current and long-term financial affects of COVID-19.
The British savings institutions company said that the impact of COVID-19 on its operations includes assumption changes to short and long-term interest rates. As a result, the building society said that entering into the UK commercial banking sector is no longer viable commercially.
Due to the decision, Nationwide Building Society will stop activity directly associated with its proposed market entry and also return the £50m grant funding it was awarded in May 2019 from the Banking Competition Remedies’ Capability and Innovation Fund. Furthermore, the savings institutions company will not take part in in the Incentivised Switching Scheme.
The Banking Competition Remedies awarded the grant to the building society to develop a new business current account or ancillary product propositions for small and medium-sized enterprises (SMEs) in the UK.
The organisation will disclose the financial effects of the cancellation of its plans within its preliminary full year results for 2019/2020. Currently, the society estimates the cancellation to cost about £70m in 2020 but expects it to become net neutral in the coming 24 months due to running cost and investment savings.
Nationwide Building Society said that all employees will be redeployed to other roles within the group. The decision will not affect its business savings accounts, which will continue to operate normally, said the building society.
Nationwide Building Society CEO comments on the decision
Nationwide Building Society CEO Joe Garner said: “Our priority as a building society must always be our existing members and employees. COVID-19 has changed the medium-term interest rate landscape, meaning the business case for entering the market is no longer viable.
“Therefore, our absolute focus will be on supporting our members and our employees through the immediate difficult time and future financial implications of the virus.”