BankWest in frame for offers as HBOS tightens belt

HBOS is considering selling assets and winding down businesses in the face of continued market turbulence and a sharply slowing economy.

Andy Hornby, HBOS's chief executive, said he would consider offers for operations with more loans than deposits to reduce the bank's reliance on wholesale funding with the securitisation market shut. Analysts said he was effectively inviting offers for HBOS's Australian BankWest business.

Mr Hornby made his comments as HBOS reported underlying first-half pre-tax profit down 51 per cent to £1.45bn. The bottom line was hit by rising bad debts and £1.1bn of write-downs on treasury holdings. The bank's shares rose 7.1 per cent because the results beat forecasts and the write-downs were lower than feared.

Mortgage bad debts jumped to £213m from £40m in the second half of last year while corporate impairment charges doubled to £469m over the same period. HBOS said it was now working on the assumption that house prices would fall by a total of 15-20 per cent this year and next, in line with a prediction from Lloyds TSB on Wednesday.

The bank may also sell treasury assets and run down businesses as its once-booming corporate bank limits lending in the downturn.

"It is about us being very, very tough and saying there are parts of our operations we will allow to run down," said Mr Hornby. "I would be very, very relaxed if the corporate balance sheet was static or declined." He declined to say whether the bank would cut jobs.

The willingness to sell assets is a change from Mr Hornby's stance a few weeks ago when HBOS was in the middle of its turbulent rights issue.

Bruno Paulson, banking analyst at Bernstein, said: "You don't talk about selling assets when you are raising £4bn of capital. I suspect that they will be open to decent offers for Australia.

"They are getting more realistic about the economy, like Lloyds. The key thing is how bad is it? If we avoid a recession, they're fine; if we don't, they're not."

Mr Hornby said that bad debts would continue to rise as the economy slows but that homeowners would not face as much pain as in the early 1990s because interest rates and unemployment would not rise to levels seen during that downturn.

There has been speculation that HBOS could face a takeover bid. Mr Hornby said: "I'm not here to predict whether companies get bid for or not."

Deutsche Bank announced fresh write-downs yesterday, taking its bill from the financial crisis over $11bn (£5.55bn). Germany's biggest bank's pre-tax profit slumped in the second quarter to €642m (£505m) from €2.7bn a year earlier.

HBOS shares closed at 290.5p.