Britain's largest building society Nationwide said it expected broad stability in the housing market over the next six to 12 months, when posting a fall of 46 per cent in full-year profit today.
British house prices have recovered ground in recent months, though they fell in February and April, according to rival lender Halifax, raising questions over the strength of the market.
"Unless there is a significant spike in interest rates, which we are not expecting, a major dip in prices is unlikely to occur over the next year," Nationwide chief executive Graham Beale said.
Data from Nationwide itself, Britain's third-largest mortgage lender, showed a 1 per cent rise in house prices in April, taking the annual rate of increase into double digits for the first time in nearly three years.
Nationwide said an increase in properties for sale would relieve pressure on prices, while a continuing lack of credit and high prices relative to salaries would act as an upward limit.
Customer-owned Nationwide said it had been hit by the contraction in its core mortgage and savings
markets and by pressure on margins. Underlying profit in the year to April 4th almost halved to £212 million.
The lender said it saw lower levels of profitability continuing throughout 2010.
It lent £12 billion of mortgages over its past financial year, representing a market share of 8.7
per cent, down from 9 per cent in 2008-09. Nationwide said it had no "aggressive growth plans" and expected to remain at that level.
The building society, under pressure from weak markets and low interest rates, plans to accelerate cost cuts to hit a targeted cost/income ratio of less than 50 per cent by the end of 2012-13 from a current 61.3 per cent.
It will review its distribution network, swollen by recent acquisitions, and administrative buildings.
Nationwide has over 1,000 retail outlets.
"It is quite an extensive network, and we need to make sure it is the right shape for the business... We need to adjust our business model to reflect the market conditions," Mr Beale said.
Nationwide has already cut more than £150 million of costs over the past three years and shrank its
workforce by just under 800 staff over the past 12 months to almost 15,800.
Arrears remained broadly flat, with mortgages three months or more in arrears totalling 0.68 per cent, well below an industry average of 2.2 per cent and expected to remain stable.
Bad debts on the commercial property portfolio saw a significantly better second half, with impairment charges dropping 20 per cent to £119 million.
Nationwide, echoing rivals across the sector, said it expected lower levels of impairment going into the coming year as commercial bad debts have peaked, adding a slower recovery and weak tenant demand could throw that off track.
Reuters