HBOS profits slump 51%

31 July 2008
HBOS saw its profits fall by 51% in the first half of the year due to the ongoing credit crunch and rising levels of bad consumer debt.

HBOS said that profits before tax slumped to just £1.45 billion in the first half of the year, compared with the £2.96 billion seen in the same period last year. The bank also revealed that it was forced to write off £1.1 billion of sub-prime losses, and £1.3 billion from customers unable to meet their mortgage and loan repayments.

The bank said that around 39,300 of its customers cannot repay their debts, which is an increase of 36% from December’s figure of 35,600. Mortgage arrears at the bank are also on the up, from 1.67% of borrowers at the end of 2007 to 1.95% today. But chief executive of HBOS, Andy Hornby, is expecting further losses. "In light of the deteriorating economic environment, we expect to see upward pressure on impairment losses," he said.

HBOS has managed to raise £4 billion from selling new shares, but the bank admitted that it was considering selling ‘selective assets’. Although Hornby did not indicate what assets these may be, it has prompted speculation that its Australian and Irish operations may be set for the chop. "We will look at all sensible options," he said. "If some buyers consider assets are worth more to them than they are to us then we don't rule that out."

Earlier this week it emerged that Abbey had knocked HBOS off the top spot as the largest lender of new mortgages, taking a total market share of 26%. Cheltenham & Gloucester came a close second with a 24% share, while HBOS now takes third place with 20%.

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