Nationwide Building Society warned that depressed levels of profitability experienced in the second half of last year could continue into the next 12 months, as low interest rates squeeze its profit margins.

The mutual, which has weathered the credit crunch better than some of its bank rivals, reported yesterday pre-tax profits of £212m for the year to 4 April, down from £686m in the equivalent period.

Underlying profit before tax in the second half was just £71m, against £322m in the first six months to September 2008.

Nationwide blamed part of the decline on a £241m provision earmarked for the Financial Services Compensation Scheme, the government safety net, which pays out to consumers when banks fail.

Financial Times, The Times, Daily Telegraph, The Independent