Alliance & Leicester, the mortgage and consumer lending bank, shrugged off a 25p fall in its share price yesterday as it released 2003 pre-tax profits up from £468m to £525m.
Although this topped most expectations, A&L shares fell from 909p to 884p. But Richard Pym, A&L's chief executive, said: "We are quite pleased with the reception we have had. We are not concerned with hour-by-hour share price movements."
However, analysts at Merrill Lynch said: "Margin pressure is higher than our forecasts. This is an area of concern."
Mr Pym admitted that prices were falling throughout the UK economy, and consumers were more aware of price than ever before. "Anyone who ignores that is making a big mistake," he said. Barclays and Royal Bank of Scotland have said they expect to maintain margins this year.
Analysts put the disappointment down to two other factors. First, the company's proposed £100m to £150m share buyback for 2004 was disappointing. Last year, it bought back £215m of its shares. Second, the market was subdued by Mr Pym's remark: "We expect a modest slowdown in the growth of consumer expenditure during the year."
A&L had a policy of keeping itself at the top of newspaper and magazine best-buy tables for mortgages, savings and loans, which was becoming harder to do as competition intensifies. On the other hand, it is driving costs down by expanding its phone and internet services, and by minimising bad debts.
Mr Pym denied that A&L was taking a tougher attitude to mortgage and loan applications, but added that the company did not intend to enter the so-called "sub-prime" market that caters for high-risk borrowers.
Last year, A&L's bad debt charge fell 13 per cent to £61m. Gross unsecured lending was a record £1.9bn, 36 per cent ahead of the 2002 figure. The former building society had record gross mortgage lending of £8.1bn, up 27 per cent.
However, its share of mortgage balances fell from 3.5 per cent to 3.3 per cent.
A&L's earnings per share rose 11p to 79p. Its total dividend is 4p higher at 43.9p.Reuse content