LONDON (Reuters) - Nationwide, the country's largest building society and second biggest-mortgage lender, said it continued to fund its business through normal channels as it unveiled a 29 percent rise in half-year profits on Thursday.
Nationwide said its underlying pretax profit rose to 394 million pounds in the six months to the end of September, up from 306 million a year earlier.
The society, which bought smaller rival Portman earlier this year, said net savings deposits jumped 96 percent during the half year to 4.1 billion pounds.
About 1.8 billion pounds of savings flowed in during September, partly due to an exodus of savers from rival Northern Rock, which suffered a bank run after it applied for emergency funding from the Bank of England. Nationwide said the savings inflow had remained high in October and early November.
"There's no doubt we've seen a flight to quality as savers seek a safe haven at a very difficult time," said Graham Beale, Nationwide's chief executive.
The lender said the high savings enabled it to fund all its mortgage lending in the half year from retail receipts.
Recent turmoil in financial markets has seen banks restrict lending to each other, which prompted the crisis at Northern Rock and has caused credit problems for other lenders, but Nationwide said it had increased liquidity and was funding the group through normal channels. It gets about 70 percent of its funds from retail deposits, leaving it far less reliant on wholesale markets than most rivals.
LENDING DROPS
Nationwide, which has 13 million members and provides 1 in 10 mortgages after its takeover of Portman, said its prime net mortgage lending dropped to 3.3 billion pounds during the half year, from 5.6 billion a year earlier, giving it an estimated market share of 5.7 percent, below its typical share of just over 10 percent.
The lender said this reflected its "cautious approach to lending in a fiercely competitive market" and it expected its market share to remain near 6 percent in the second half.
"We'd be quite comfortable with that performance in the current market conditions," Beale said on a conference call.
Nationwide expects the UK housing market to slow in 2008 and last week forecast house prices would stay flat.
Nationwide's purchase of Portman increased its assets to 166 billion pounds and Beale said he would continue to look at other acquisitions, but industry consolidation was likely to be on hold during the credit crunch.
"I think at the moment it's probably time for consolidation rather than seeking to expand," he said, adding that he was not interested in buying any of Northern Rock's mortgage book.
