BoS virtues rewarded with 30% profit surge
Thursday 22 April 1999
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.
Diving in at the deep end is no excuse for shirking the style stakes
- 1 Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
- 2 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
- 3 Why I'm on the brink of burning my Israeli passport
- 4 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
- 5 The true Gaza back-story that the Israelis aren’t telling this week
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Loom bands: Bids for dress made from colourful rubber pass £170,000 on eBay
Supermoon 2014: When and why will the moon look bigger and brighter this summer?
Gaza-Israel conflict: The terrible price Palestinian children are paying for Israel’s war with Hamas
Rotten egg smell could help battle heart disease and Alzheimer's
Sustained immigration has not harmed Britons' employment, say government advisers
War is war: Why I stand with Israel
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Australia facing international condemnation after turning around Sri Lankans at sea
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
iJobs Money & Business
£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...
£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...
£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...
£40000 per annum: Harrington Starr: Network Engineer (CCNA, CCNP, Linux, OSPF,...