Nationwide has seen its costs rise by £75 million, driven by spending on the overhaul and modernisation of its IT infrastructure.
The building society has undergone a five year IT transformation project, started in 2008 and costing a total of £1.2 billion. This has involved the replacement of its core banking platform, the overhaul of its data centres, and the launch of new online and, more recently, mobile banking services.
In its results for the six months up 30 September, Nationwide revealed that its total underlying expenses hit £732 million, up 11 percent from £657 million at the same point last year, with the increase largely attributed to its investments in IT.
“The growth was driven primarily by increased depreciation and running costs of enhancements to the Group’s technology infrastructure which became operational in the second half of 2012/13,” the building society said in its interim results statement.
The building society said that part of the increased costs were driven by technology depreciation of approximately £32 million over the period.
The bank said that the increase in spending was also related to the delivery of the new Current Account Switching Service launched by the UK Payments Council in September. The initiative, which cost the financial industry an estimated £750 million, required banks and building societies to ensure that their internal systems were compliant with the central switching platform.
The group also attributed restructuring costs of £35 million to the establishment of a “more efficient and flexible sourcing model for the Group’s technology”.
Despite the increased costs, Nationwide’s underlying profit has grew by 155 percent over the period to £332 million.
In the results statement the bank also highlighted its spending on information security, which it categorises as an emerging risk.
“This remains an area of investment to ensure we remain industry leaders in information security and cyber-crime controls during adverse economic conditions and a heightened external threat environment.”
Earlier this year, the Bank of England’s director for financial stability, Andrew Haldane, revealed that UK banks recognise cyber crime as a major risk, while the Bank considereds it to be more of a threat to stability than the Eurozone crisis.