Update: Nationwide Building Society

The stable outlook reflects our view that Nationwide will continue to deliver resilient capital generation through earnings and maintain a robust balance sheet. We expect that the VMUK acquisition will be completed as planned sometime in the fourth quarter of 2024 and Nationwide's multiyear integration timetable will mitigate execution risks. We project that the RAC ratio will fall to about 11% on completion of the transaction and then strengthen gradually, and our ALAC ratio will remain above the threshold consistent with a two-notch rating uplift. We could lower our rating if Nationwide's performance came under significant pressure, likely precipitated by stronger-than-expected competition, weakening cost control, or a deterioration in its risk appetite or the U.K. economic environment. We could also

...Our rating on Nationwide Building Society (Nationwide) continues to balance its strong capital position and business performance against its concentrated exposure to the leveraged U.K. household sector. Nationwide's deep U.K. mortgage franchise, disciplined strategic execution, and cautious risk appetite translate into significant financial resilience and support our rating. The firm delivered solid annual results in April 2024, with statutory profit before tax of ú1.8 billion (April 2023: ú2.2 billion) on the back of persistently high interest rates, a relatively low impairment charge, and good cost control. The society remains one of the U.K.'s largest residential mortgage lenders and savings providers, with a heavy focus on prime residential mortgages and a relatively small commercial lending portfolio. Together, its deep mortgage franchise, against its narrow scope, are well balanced in our rating (see chart 1)....

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