Investment Column: Halifax brand name gives it that extra appeal

HALIFAX, the building society that converted to a bank, making shareholders of its members, started life helping Yorkshire folk to buy homes. As a FTSE 100 company, it now has a different character. Although its head office remains in sleepy Halifax, its directors are based in London. They've been doing the sort of things the directors of FTSE companies like to do - handing back cash to shareholders and looking at deals. But what about Halifax's core activities?

Having handed back pounds 2.25bn to shareholders in the last 18 months - more than any other company in the world - chief executive Jim Crosby has at last decided to focus on the business.

Halifax's traditional mortgage and savings business is becoming increasingly competitive. In the first half of the year, group margins on both loans and savings narrowed, if less so than at Halifax's peers. As market leader, Halifax has the most to lose to Johnny-come-lately lenders. The worry is that borrowers are getting their calculators out to work out the best deals, instead of going blindly to established brands.

But Halifax's key asset differentiating it from its rivals is its brand. The proof of its strength is Halifax's scooping of one-third of all cash ISA balances. Now it is seeking to apply its strength in other retail financial activities, such as long-term savings. Recently established businesses now account for 35 per cent of group profits, up from 29 per cent last year. Meanwhile, it is being aggressive on costs, which should grow by less than 1 per cent this year.

Lehman Brothers expects full-year pre-tax profits of pounds 1.74bn and earnings of 51.3p this year, putting Halifax on a forward price-earnings ratio of 14. That's in line with the sector. But Halifax, with its brand's strength, should really command a premium.

The shares fell 13p yesterday to 698p, largely because of heavy buying the previous day in anticipation of good results. At less than 700p, Halifax is the choice play in an oversold sector. Buy.

PROMOTED VIDEO
Life and Style
food + drink
Arts and Entertainment
musicBand's first new record for 20 years has some tough acts to follow
Life and Style
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
tech
News
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvSeries 5 opening episode attracts lowest ratings since drama began
News
ebooksAn unforgettable anthology of contemporary reportage
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

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

COO / Chief Operating Officer

£80 - 100k + Bonus: Guru Careers: A COO / Chief Operating Officer is needed to...

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments