Safe as houses: why Nationwide survived

Matthew Lynn says Britain’s largest building society prospered by refusing to follow fashion — while its bolder, greedier rivals have all gone bust or been taken over

Over the last 25 years, Aesop’s fable of the tortoise and the hare has been a poor guide to financial markets. As the swashbuckling investment banks rose in power and influence, every- one had their money on the fast, fluffy creature with the big ears. In markets that favoured speed, innovation and boldness, there wasn’t much space left for slow, solid creatures with shells on their backs.

Until now, that is. In the wake of the credit crunch, financial tortoises may be having their moment. And tortoises don’t come much more solid than the Nationwide Building Society.

Formed 160 years ago, the Nationwide was the only one of the big, traditional building societies to resist the tidal wave of innovation that swept over the savings and mortgage market in the last decade. It stayed doing what it had always done: collecting small sums of money from its savers, and parcelling it up into mortgages, lent on fairly conservative terms to people who could prove they had a job and could pay the money back. And after everything that has happened in the markets over the past 12 months, down at their not-terribly-fashionable Swindon headquarters, they could be justified in feeling a little bit smug.

‘Without wanting to sound pious, we think that was the right decision for us to take,’ said Tony Prestedge, group development director of the society and the man in charge of steering its strategy. ‘It was a conscious decision to keep things the way they were. We could have taken our wholesale funding up to 50 per cent.