Abbey National unveiled a 15 per cent drop in third-quarter profits in its core personal financial services business yesterday and said revenues could remain weak for the rest of the year as Britain's struggling sixth-biggest bank takes the pain of trying to revive itself.
Shares in the bank - which rebranded itself as Abbey last month - slipped 12p to 552.75p.
However, Luqman Arnold, who took over as chief executive a year ago, said the bank was ahead of schedule in implementing its three-year rescue programme, including selling off the hot-potch of divisions in its portfolio business unit that it no longer wants.
Abbey is now likely to sell the businesses, which include the parts of the wholesale bank which created a massive black hole in its accounts last year, by the end of 2004. That would be one year ahead of schedule.
Mr Arnold said he had decided to avoid the "water torture" of trying to turn Abbey around gradually, and instead planned sweeping changes by the middle of next year. By then, all IT in the branch networks and much of the rest of Abbey's computer network will be replaced and 600 new customer-facing staff will be in place. Abbey will also launch a simplified range of products to tempt customers as part of its strategy to compete primarily on service rather than cost.
"There will be a tremendous impact on the customer experience by June next year," Mr Arnold said, adding that from that point onwards he expects revenues to start a significant ascent.
In the meantime Abbey has tried to breath new life into its business by slashing lending rates, with the result that its interest margins - already some of the lowest in the banking sector - are likely to be further eroded.
The margin is expected to fall to 1.54 per cent for the full year, against 1.61 per cent in the first half .
Abbey said it had seen strong net mortgage lending, which was £6.5bn in the year to date - up 55 per cent on the same period last year.
The bank took an estimated share of net new lending of 9.4 per cent - which is better than the 8.9 per cent share it took in the first half, but less than its share of existing mortgages.Reuse content