Investment Column: Abbey can not rely on habit

LIFE, AS Abbey National's ads keep telling us, is complicated enough. Until recently Abbey was on its own as the only former building society to have turned itself from a supposedly cuddly organisation caring for its members into a thrusting PLC eager to please money-grabbing City folk.

There are now five converted building societies, all complaining about how competitive the mortgage and savings market has become, and all boasting about how many new products - insurance policies and pensions - they are selling to their existing customers. Abbey appears to have advantage over the more recent converts to PLC status; it was first, and first by a long way.

Abbey's rivals are still struggling to get to grips with being a PLC, and now they have additional headaches following new arrivals like Egg, Prudential's new banking arm, in the mortgage and savings market.

Meanwhile, Abbey is several steps ahead of the game. While Halifax boasted yesterday that 35 per cent of its profits came from businesses other than mortgage and savings, Abbey is up to 49 per cent. It aims to be at 65 per cent within the next five years.

More importantly, it has had the time to decide exactly what it wants to be and who its customers are.

Abbey is happy being the bank for the middle class, people who slump in front of the television after putting the kids to bed, rather than firing up the PC to surf the net for a one-off mortgage deal. Abbey says trust us. You may not get the very best price that minute, but you will not get ripped off.

Half-year profits - up 17 per cent at pounds 875m - show the bank holding on to margins, but at the expense of letting its share of the mortgage market go to hang.

Its chief executive, Ian Harley claims that the hot money he may lose to the likes of the Prudential's Egg is no worry; Abbey's customers are more loyal and it has a greater share of the pensions, Individual Savings Accounts (ISA), and insurance market.

The claim is unconvincing, however. It may find that customers, even middle class ones, are more picky than it believes. Loyalty cannot be relied as Abbey's markets become more competitive.

ABN Amro expects full-year pre-tax profits of pounds 1.6bn, putting Abbey's shares, at 1137p, on a forward price-earnings ratio of 14.5. Given what Abbey has to lose now, the shares are expensive.

Start your day with The Independent, sign up for daily news emails
News
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
news
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower