The building society will return a £50m grant from a pool of RBS cash to foster competititon among British banks as it scales back ambitions in the face of the outbreak.
“The impact of Covid19, including assumption changes to short and long-term interest rates, has meant that the option of entering the business banking market is no longer commercially viable,” Nationwide said.
“As a consequence of its decision, Nationwide will cease activity directly related to its proposed market entry.”
The Bank of England slashed the base interest rate to a historic low of 0.1 per cent earlier this month. The drastic measures is designed to boost consumer spending. However, that means banks earn less interest on lending.
Nationwide now faces £70m bill
Nationwide expects its sudden U-turn to cost it £70m. But it plans to redeploy staff working on its scrapped business banking debut.
“Our priority as a building society must always be our existing members and employees,” Nationwide chief executive Joe Garner said.
“Covid-19 has changed the medium-term interest rate landscape, meaning the business case for entering the market is no longer viable.
“Therefore, our absolute focus will be on supporting our members and our employees through the immediate difficult time and future financial implications of the virus.”
British banks take coronavirus blow
Banks are some of the worst hit firms from the UK coronavirus outbreak. Major lenders including Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland have scrapped their dividends over the crisis.
And they have come under fire for imposing stringent checks on small businesses applying for coronavirus loans underwritten by the government.
Criticism aimed at banks has pushed chancellor Rishi Sunak to revamp the loans scheme, which allows companies with turnover under £45m to apply for loans of up to £5m.
Yesterday Sunak also committed to providing similar support for medium businesses.