Abbey sees profits soar 25%

29 April 2009

Abbey saw its profits soar by 25% to £372 million for the first three months of the year as it poached mortgage and savings customers from its rivals.

The bank, which last year acquired Alliance & Leicester and Bradford & Bingley's saving division, issued £1.5 billion of loans to businesses and provided £800 million of mortgage credit in the first three months of the year. It also enjoyed £0.8 billion of new savers’ money deposited into its coffers during the first quarter.

Abbey, which the UK’s second largest mortgage lender, used its deposit business to issue £800 million of new home loans between January and March - giving it a market share of 15%. The acquisitions of the savings arm of Bradford & Bingley and Alliance & Leicester also boosted its branch network to 1,300 and made it the third biggest player in the UK savings market.
Although the group reassured investors that the majority of its existing mortgages were of “high quality”, it still saw loans more than three months in arrears increase from 0.93% to 1.13% of its total mortgage book. This is, however, around half the industry average for the period.

Meanwhile, Santander, the Spanish owner of all three banks, has reported a profit of €2 billion profit in the first three months of the year - but only after some careful tweaking of its loan rates. Analysts say that, because Spanish loans are only repriced once a year, banks can move the interest rates in between to make extra cash. They had been expecting a 15% fall in profit.
However, Santander also saw its bad loans as a percentage of total lending rising to 2.49% from 2.04% at the end of 2008. Bad debts at Santander’s UK arm stood at £189 million in the quarter, down from the £234 million for the previous quarter but more than double the £90 million posted for the same quarter a year ago. 

"In general, the new business is starting to recover, although it has yet to benefit fully from the organisational changes that are being implemented," Santander said.

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