Abbey National, the mortgage bank struggling to recover from blunders which brought it to its knees last year, unveiled plans yesterday for a complete overhaul of its brand and range of products this autumn.
Luqman Arnold, the chief executive of Abbey, announced the plan as the bank slumped to a £144m loss before tax in the six months to 30 June, compared to £412m of profits in the same period last year.
Investors actually welcomed the loss, as it meant Britain's sixth-biggest bank had completed the sale of unwanted businesses such as consumer credit arm First National fasterthan expected, thereby crystallising losses in the first half of the year. Abbey's shares leapt 47.5p to 536.75p, making it the biggest mover in the FTSE 100.
In a surprise move, Mr Arnold, who took over the top job last November, refused to rule out the possibility that the Abbey National name would be scrapped as part of the makeover. "Everything is open to review," Mr Arnold said. "But what is going to happen to Abbey is much more fundamental than a change of name."
Though a complete name change is considered unlikely, Mr Arnold said he wanted to get back to Abbey's status in the City 10 years ago, when the bank, a former building society, had an "edgy" image and was willing to "break banking taboos".
Mr Arnold's strategy for Abbey's recovery centres on selling personal financial services such as mortgages, savings and investments. The bank is also selling off £60bn of risky and non-core assets and slashing costs, with 350 jobs cut this year. It said it would join the trend of back-office outsourcing to India in due course.
Mr Arnold and finance director Stephen Hester reiterated that the turn around in Abbey's core business would not be achieved until the end of 2005, though they said customers should start to notice improvements later this year.
Abbey has already managed to claw back some of its dwindling market share in mortgage sales, with its proportion of net lending standing at 9.1 per cent of the market, compared with 6.3 per cent a year ago. Savings and credit cards were also slightly up.
Much of the boost in sales was achieved by slashing prices and reducing margins. In the longer term the bank aims to attract customers through the strength of its brand and service levels, enabling it to raise prices.
The dramatic rise in Abbey's shares, up more than 50 per cent since March, prompted renewed speculation that the bank's future as an independent company are numbered.
Abbey has been stalked by Lloyds TSB, Bank of Ireland and National Australia Bank in the past two years and some banking sources have pointed to Royal Bank of Scotland as a possible bidder as a way of bolstering its mortgage book.
Hugh Pye at BNP Paribas said: "Abbey shareholders would probably like a decent premium from a bidder, because otherwise they are quite happy to let the current management get on with their current strategy. But a premium of 30 per cent would make any deal worth £7 a share, which is 17 times earnings, making it look rather expensive."Reuse content