Nationwide outlook gloom
Building society Nationwide has been dealt a blow after ratings agency Fitch said a "challenging" economic climate would dent its loan book.
Fitch, which lowered its outlook on the UK's biggest mutual from 'stable' to 'negative', said pressure on profits would intensify over the next year.
Fitch director Andrea Jaehne said: "Fitch believes the society's asset quality is likely to show modest signs of weakening from its robust position given the agency's moderate economic outlook for the UK - Nationwide's main operating market."
The rating agency said Nationwide - the UK's second biggest deposit taker - has a strong capital position but will come under pressure as unemployment peaks at the end of next year and interest rates begin to rise from record lows.
It said: "As a result, Nationwide's large, high quality residential mortgage book could experience further significant stress while pressure could intensify on its commercial book.
"Fitch expects the society's operating profitability to be positive but subdued for 2010 and 2011."
As a mutual unable to call on funds on shareholders though a rights issue, Nationwide's flexibility to absorb potential charges was "somewhat limited", it added.
A Nationwide spokeswoman said of Fitch's decision: "It is symptomatic of the wider economic environment."
The mutual's pre-tax profits for the year to April 4 were down 69% at £212 million as provisions for bad debts rose sharply to £394 million.
Margins were also hit by record low interest rates, while Nationwide also paid out £241 million in a levy paid into the Treasury's Financial Services Compensation Scheme.
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