Nationwide: the feeling is mutual

The slide below is one I use frequently as part of the mix to illustrate the essential differences between old-world CSR and new-world sustainability.

old vs new.010

Looking in particular at the ‘stockholder vs. stakeholder’ view, businesses structured as partnerships or mutuals are often the best examples of this – owned, as they are, by their employees or customers, rather than conventional investors.

While I’m sure there must be many queuing up to pour scorn on the value of these models in the wake of the Co-op Bank’s recent difficulties, results published today by the UK’s largest building society, Nationwide, tell a rather different story. (It’s worth pointing out, by the way that the Co-op Bank wasn’t actually a mutual at the time it ran into difficulties; rather it was, and is, a PLC whose air of mutually is conferred on it by Co-op Group ownership.)

For anyone who doubts the commercial rewards that can be gleaned when you look beyond the received orthodoxy of maximizing shareholder value, check out these numbers:

  • Underlying half-year profits up 155% from £130m to £332m
  • Deposit balances up £5.4bn, a quarter of all such new saving in the UK
  • The rate of new current accounts being opened up 16%

Much of that momentum, I’m certain, comes from the Nationwide’s (increasingly rare) mutual status and the message implicit within – i.e. that their business is designed from the ground up to put customers’ interests first; that they actually give a crap about their lives and their dreams. Even more importantly, it comes from that rather intangible ethos being reflected in very tangible business decisions – like, for example, Nationwide having provided more than a fifth of all mortgages to first-time house buyers in this most recent six-month period.

I doubt it’s too grandiose to suggest that Nationwide doesn’t see itself in the business of lending money. It’s in the business of helping people to realise their ambitions – in this case to start a new life together with a partner, maybe to raise a family, in a place they can call their own. The dosh is but a means to a higher end.

In response, it would seem customers are deserting high street banking rivals to join Nationwide in their droves! And that, perhaps, leads to the most striking comparison of all when you think back to the financial crisis.

Unlike Northern Rock, for example, which went nuts lending more than homebuyers could afford pay – and with predictable consequences – Nationwide’s average loan to value (LTV) ratio on these new mortgages is only 69%, and only 49% on its existing stock. What’s more, its net mortgage lending is virtually identical to the increase in its net savings.

To put it another way, its books are well and truly balanced.


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