For the third consecutive year, Nationwide, the largest building society in the UK, will grant a £100 cash bonus to millions of its members, supported by a surge in profits attributed to its acquisition of Virgin Money and an increase in mortgage activity.

The latest payout, referred to as a “fairer share”, will reach approximately £410 million, benefiting more than four million eligible customers who hold a current account along with a savings account or mortgage with the institution.

This announcement came during Nationwide’s recent full-year results release, where the customer-oriented organization reported generating a record £2.8 billion in value for its members in the fiscal year concluding in March. Of this total, roughly £1.8 billion arose from its competitive savings and mortgage rates, while the remaining £1 billion constituted cash bonuses distributed directly to members.

Despite these distributions, the building society’s profits increased to £2.3 billion, up from below £1.8 billion in the previous year, fueled by its £2.9 billion acquisition of Virgin Money, completed in early October, alongside a significant rise in mortgage lending.

Net mortgage lending surged to £15.9 billion, compared to £2.6 billion the prior year, as many homebuyers rushed to capitalize on a temporary stamp duty discount that was available until the end of March. Last month marked Nationwide’s busiest period for mortgage completions, with over 30,000 transactions finalized.

Debbie Crosbie, the chief executive of Nationwide, described the past year as “outstanding” for the organization.

Crosbie, who made headlines in March of last year with her announcement of the Virgin acquisition, emphasized that the deal allowed Nationwide to surpass NatWest, becoming the second-largest mortgage lender in the UK, trailing only Lloyds Banking Group. However, some members criticized the building society for not consulting them before the takeover.

As a gesture of gratitude, Nationwide recently distributed a one-time payment of £50 to 12 million members holding a qualifying mortgage, current, or savings account, amounting to a total of £615 million.

This latest payout is in addition to a previous fairer share payment of £385 million given in June, with an initial payment of £344 million occurring two years ago.

Debbie Crosbie’s connection to Virgin stems from her nearly 22 years at CYBG, the parent company of the Clydesdale and Yorkshire banking brands, before transitioning to TSB in 2019 after CYBG’s acquisition of Virgin. She joined Nationwide three years ago, with the Virgin takeover representing her most pivotal strategic decision to date.

Currently, Virgin operates as a separate entity; however, Nationwide is likely to realize considerable cost savings when integrating the institution.

“We’re optimistic about deriving significant synergies from areas like third-party costs, funding costs for both companies, and IT infrastructure,” Crosbie stated, noting that she does not foresee substantial employment changes in the short-to-medium term.

Muir Mathieson, Nationwide’s finance director, commented that the mortgage business remains strong even after the conclusion of the stamp duty discount period.

“We expected there might be a significant drop in activity, but that hasn’t been the case,” he remarked.

Proposed ISA Reforms Could Increase Mortgage Costs

The chief executive of Nationwide has cautioned that potential limitations on cash ISA savings could lead to higher mortgage costs at mutual lenders.

The government is considering reforms to the ISA system to encourage more investments in equities, aiming to bolster London’s underperforming stock market. Presently, individuals can save or invest up to £20,000 annually tax-free in an ISA, but one option on the table is to reduce the allowance specifically for cash ISAs, thereby promoting investments in stocks and shares ISAs.

Crosbie highlighted that such changes could impact several building societies that rely on saving accounts as a critical funding source. “For smaller building societies, this might result in increased mortgage lending costs,” she noted.

She urged the government to maintain the current limit on cash ISAs, arguing that equity investments may not be suitable for everyone, particularly retirees or younger individuals saving to purchase a home.

Research conducted by Nationwide has indicated that a significant majority of customers lack an interest in equity investments.

The onset of the new tax year in early April typically triggers a rise in ISA activity, but Nationwide has recently experienced a particularly busy period, which Crosbie attributes to heightened speculation regarding potential changes to cash ISA limits.