Link with Lloyds to cost C&G 8m pounds

CHELTENHAM & Gloucester Building Society's proposed acquisition by Lloyds Bank will cost C&G well over pounds 8m in professional fees and postal costs, writes John Willcock.

The society said it had already spent pounds 4.2m on acquisition costs as it announced half-yearly results. Pre-tax profits surged almost 50 per cent to pounds 108.8m for the six months to June after a big fall in bad debt provisions.

David Barnes, finance director, said costs associated with winning customers' approval for the Lloyds link-up would continue at the same rate for the second half and into the new year.

Each mailshot to C&G's customers - more than a million and there have been three mailings so far - cost several hundred thousand pounds. Professional advisers' fees are also included in the pounds 4.2m.

Provisions against bad debts fell 63.1 per cent to pounds 23.5m, but administrative costs grew from pounds 49.1m to pounds 58m. The society's gross mortgage lending grew by 29.5 per cent to pounds 1,484m despite the moribund housing market.

Its share of total British mortgage assets grew 10 basis points in the first half, taking the society's share of the mortgage market to 6.7 per cent, making it the sixth- largest lender.

Andrew Longhurst, C&G's chief executive, said: 'The market remains subdued and competitive pressures significant. C&G's continued focus on and commitment to the core mortgage business has resulted in an excellent lending performance in both volume and quality, but inevitably at the cost of lower operating margins and operating profits.'

The society claims it has pursued an aggressive pricing strategy, including its 'no-fees' policy and the Cash Gift mortgage range. Total assets grew 4.5 per cent to pounds 18.48bn, up from pounds 17.68bn last time.

The society's capital position improved with the key gross capital ratio at 6.84 per cent compared with 6.73 per cent a year earlier.