Abbey set to announce firm offer for ScotAm
Friday 28 February 1997
"We think we will be able to put forward a very attractive set of propositions," said Lord Tugendhat, chairman of Abbey National. "A combination with Scottish Amicable would advance Abbey National's strategy of diversification and our aim of expanding further into life, pensions, investment and protection products."
The bank derives 40 per cent of its profits away from its traditional mortgages and savings base, but wants to increase that to 50 per cent. It bought Scottish Mutual, another life assurance group, five years ago. Lord Tugendhat said the bank's "record of managing a Scottish-based life office is a very good one".
If Abbey wins the bidding for Scottish Amicable, which has called for firm bids from interested parties by today, it would become the third- largest life company in Scotland.
Abbey bid pounds 1.4bn for Scottish Amicable last month, derailing the insurer's plans to demutualise and eventually float on the stock market. But a bidding war was sparked when Prudential upped the stakes by topping Abbey's offer, and other potential bidders have emerged.
Abbey yesterday announced pre-tax profits for 1996, excluding the costs of integrating National & Provincial, of pounds 1.23bn, up 20 per cent. If the integration costs are included, Abbey made a profit of pounds 1.17bn.
Under the terms of the merger N&P members received shares at a price of 567p. Abbey's shares have since risen to 763.5p and Lord Tugendhat said the majority of the members who took shares held on to them.
The merger increased Abbey's share of mortgages to 15 per cent. However, its share of new business fell last year - to 2.4 per cent or 6 per cent if N&P's share is included - even though it spent pounds 365m on cash-backs and discounts to lure borrowers. The bank charged pounds 187m of the cost of these incentives to its profits.
Abbey stopped offering cash backs and discounts for re-mortgaging business late last year but still offers them to home movers.
Next week it will launch a household management account linked to Safeway's ABC bonus card, as part of a three-year deal with the retailer which will eventually lead to the launch of debit card, a credit card and instore banking.
Peter Birch, chief executive, will retire at the 1998 annual general meeting but Lord Tugendhat said yesterday his successor would be appointed internally by this time next year.
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