Nationwide revealed it is pulling out of commercial real estate lending to focus on less risky business as it reported a drop in profit following pressure from record low interest rates.

The UK’s largest building society posted a pre-tax profit of £696m in the six months to the end of September, down from £802m in the same period a year ago.

Nationwide said that profit was dented by the low interest rate environment, an increase in costs as it continues to invest in digital services, and a slight increase in bad debts.

Joe Garner, who joined the building society earlier this year as chief executive, said that the building society will withdraw from commercial real estate lending after conducting a strategic review of the business following his arrival.

Nationwide said it will stop lending to new and existing commercial real estate customers, in the view that it is “not key” to its future business model.

Chris Rhodes, an executive director at Nationwide, said: “Our commercial real estate business has been running down slowly over a period of time,” adding that it amounts to £2.7bn or about 1 per cent of assets.

“As we focus on our core business now is the right time to close that business.” The building society said it is consulting with employees as it expects to make less than 100 positions redundant.

Nationwide’s results come after the Bank of England slashed the bank rate to a fresh record low of 0.25 per cent in August, placing further pressure on net interest income, a measure of earnings from loans minus deposit costs.

Mr Garner said: “Despite economic uncertainty following the EU referendum, the society has continued to lend to help our members get on to and move up the housing ladder, with record net lending in the half year.”

However, the building society warned that “there are signs of a modest slowdown in activity in the housing market, especially in regard to the buy to let market”.

Gross mortgage lending over the period increased by 17 per cent to £17.5bn, representing a market share of 14.5 per cent. Deposits increased by £4.7bn, up from £2.6bn a year ago.

Nationwide said it attracted a “record” number of current account switchers, luring 16 per cent from other banks.

Of the new current account openings, more than half were done in a branch. The building society is opening new branches in certain locations that have been left without a banks as they continue to cut their networks in a bid to save on costs.

Get alerts on Nationwide Building Society when a new story is published

Copyright The Financial Times Limited 2018. All rights reserved.

Follow the topics in this article