BoS virtues rewarded with 30% profit surge

BANK OF SCOTLAND yesterday shrugged off the controversy over its recent tie-up with American evangelist Pat Robertson to deliver pre-tax profits of just over pounds 1bn for the year to the end of February, a rise of 30 per cent on the year before.

Peter Burt, group chief executive, yesterday dismissed the adverse reaction in Scotland to the deal to set up a direct banking operation in the US with Mr Robertson as a "little local difficulty".

Gavin Masterton, treasurer and managing director, insisted : "The Bank is areligious and apolitical." He added: "We are very enthused about opening up the American market."

Yesterday's headline profit figure includes a pounds 162.1m net gain on the sale of Countrywide Banking Corporation, the bank's New Zealand operation, to Lloyds TSB last year. When that is stripped out, together with the pounds 10m profit contribution of Countrywide before it was sold, underlying profit growth was a more modest 16 per cent.

The figures were in line with City forecasts, but expectations for this highly regarded bank are now so high that the results were greeted with mild disappointment. The bank's shares fell by 40p to close at 870p yesterday.

John Tyce at SG Securities said: "When excellence is expected of you, being OK is not good enough."

The bank enjoys an enviable reputation as a tightly run and highly innovative organisation. Its pioneering supermarket joint venture with Sainsbury's, the food retailer, is still losing money but it should move into profits in the first half of this year.

The bank is now exploring links on the Pat Robertson model with other organisations, both in the UK and abroad. Bank West, its Australian offshoot, has turned the corner and is now contributing to the steady profits growth.

Above all, Bank of Scotland has kept a tight grip on costs. The cost/income ratio fell again last year from 50.7 per cent to 49.1 per cent as growth in earnings continued to outpace growth in overheads.

Unlike its larger rivals, including the Royal Bank of Scotland, the bank is not mesmerised by acquisitions, although Mr Masterton insists that it does look at opportunities from time to time.

With a low and falling cost base, and unencumbered by an unwieldy English branch network, the bank is steadily increasing its market share at the expense of its bigger England-based rivals. UK market share is now up to 6.6 per cent.

Having put a brake on volume growth midway through the year because of concern about the impact of a slowdown in the economy, the group is now in expansionist mode again.

Mr Masterton said: "We constantly keep our cost income down. Logically we should gain market share. If the creativity in our products is there and our delivery is there, we have no need to worry."

SG Securities believes that, assuming no gains on disposals, headline profits will come in at pounds 1bn for 1999/2000, a shade down on this year, giving a prospective price/earnings ratio of 17, a discount to Lloyds TSB but a premium to Barclays.

There is little doubt Bank of Scotland deserves to trade on a higher rating than any UK bank apart from Lloyds TSB. For the moment, however, the price is up with events.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones