Nationwide Building Society (POB_p.L) announced the closure of its Commercial Real Estate (CRE) business, after it said the Brexit vote presented a bleak outlook for the property market. Nationwide’s CRE business has assets valued at £2.7 billion, which equates to 1 percent of the bank’s total assets. The bank said it had been cutting down its operations at CRE even before the UK announced in June that it would be leaving the European Union. CRE’s major source of revenue was lending to low-risk property in Britain. “Since the EU referendum, expectations for commercial property values have moderated and most forecasts are predicting modest falls,” Nationwide said. The value of British retail and office properties have dropped since the announcement, with many lenders being affected by the decision.
Nationwide’s Chief Executive Joe Garner revealed that of the near 100 employees to be affected by the decisions, plans are being made to retain a good portion of them, if not all of them. Garner began his tenure earlier in the year, and has immediately been thrust into key decision making policies. The bank’s underlying profits are down by over 20 percent from last year. The £615 million profit is a strong deviation from last year’s £801 million, and it is also lower than the projections made earlier in the year. “Our profit performance has reduced in line with our expectations and reflects continued margin pressure due to the prevailing low interest rate environment,” Garner said at the press release. The bank revealed that prime gross mortgage lending for the first half of the year was a record £14.7 billion. The good news though, is British lenders have not been as affected by the Brexit vote as expected, giving many reason for optimism.