Abbey reports jump in profits

29 July 2009

Santander, the Spanish parent of Abbey, Alliance & Leicester and Bradford & Bingley, has announced a 20% jump in revenue within its UK arm during the first half of the year - despite the ongoing credit crunch.

The banking group, which is the second largest in the UK after HSBC, saw profits climb amid improving conditions in lending and bad debts. Santander attributes its profit growth in the UK to its growing range of investments, credit cards and insurance products, which are a move away from its traditional mortgage and savings products.

Santander plans to rebrand its main UK businesses, including the three banks, by the end of 2010. Abbey credit cards have already undergone a name change, and are now branded Santander. It says it is on track to save £180 million from combining and rebranding the banks' 1,300 branches.

Despite the strong performance in the UK, Santander as a group saw its profit fall 4.5% during the first half to €4.51 billion. However, this is ahead of market expectations and a rise of 9% on the last six months of 2008.

Loss loan provisions soared by almost two thirds to €4.6 billion. In the UK, provisions stood at £176 million in the second quarter, up from £92 million a year ago but down from £189 million in the first quarter of the year.  

The UK's second biggest mortgage lender and third largest savings bank snapped up Alliance & Leicester and the savings business of Bradford & Bingley last year – a move which increased the value of loans by 43% and savings deposits by 66% on the previous year. It is now on target to open one million new bank accounts in 2009.

As the government pressures the banks to up lending to homeowners and small businesses, Santander reports that loans to small businesses climbed 13% on the previous year while it also grew its share of the mortgage market slightly to 16%.

However, the number of residential mortgages three months or more in arrears lifted to 1.34% at the end of June from 1.13% at the end of March, but fewer properties were repossessed during the quarter. Abbey said this was to be expected given the current market conditions.

Antonio Horta-Osorio, chief executive of Abbey, said the group had performed well in the first half. He added: “We have delivered an excellent increase in revenue and profit despite tough market conditions, underpinned by market share gains and growth across all business divisions.”

However, he also warned that the economic recovery would take a long time. 

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