Abbey sparkles with 32% surge to £932m

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The Independent Online
Britain's third-largest bank, Abbey National, shrugged off the banking gloom caused by the Barings crisis with a sparkling set of results yesterday helped by the reduction of bad debt provisions and a healthy spread between the interest rates on lending and borrowing.

Pre-tax profits increased by 32 per cent to £932m in the year to December, ahead of most City expectations. Analysts upgraded their forecasts to £1bn for next year and the shares moved 5p ahead to 440p.

"It's all about improved margins and a little bit of extra volume," said Hugh Pye, banking analyst at brokers BZW "These are a good set of figures and Abbey has got a fair wind behind its sails."

Abbey has been keen to move away from being just a savings and mortgage company The bank aims to derive 40 per cent of its profit from non-savings and loan areas such as insurance, PEPs and unit trusts.

Bad debt provision fell from £218m to £74m helped by better performance in the housing market. Mortgage repossessions were a third lower than last year, with the number of Abbey mortgage-holders six months or more behind in their repayments down by 20 per cent. The bank holds fewer than 3,000 re-possessed properties compared with nearly 5,000 in 1993.

Profits at the bank's treasury operations fell 12 per cent to £128m due to increasing competition and a tightening of margins.

The bank's life assurance operations, which include Scottish Mutual and Abbey National Life, showed strong growth with pre-tax profit up 54 per cent to £94m, though analysts suggest Abbey has entered the market too late to become a significant player. The bank admitted it has some way to go in the cross selling of products such as pensions and life assurance policies. So far the average number of Abbey products per customer was barely more than one.

The final dividend was raised by 27 per cent to 17.75p.