HBOS lifts forecasts on cost savings and revenue benefits

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The Independent Online

HBOS, the UK's fifth-largest bank, yesterday upped the projected cost savings and revenue benefits to be had from the founding merger of Halifax and Bank of Scotland in September. The bank also sounded an upbeat note about the prospects for the UK economy and the housing market next year.

Cheaper stationery costs and the elimination of overlapping information technology meant annual savings would be £35m higher than originally forecast, at £340m. Yearly revenue synergies would be £35m higher at £350m.

The one-off cost of integrating the banks would also rise, by £40m to £350m, about one-third of which would be taken as an exceptional charge in this year's results.

HBOS has caused concern among some investors by positioning itself as a consumer champion with expensive initiatives such as interest-bearing current accounts for small businesses and the re-pricing of its mortgage book. That has prompted fears that projected merger synergies might be hard to achieve, even though the bank is cutting some 2,000 jobs. Yesterday shares in HBOS closed down 10p at 808.5p.

With investors also nervous about the banking sector more generally as the economy slows, HBOS said the UK would see a slowdown in 2002, although the bank would be raising bad debt provisions by only a modest amount because it enjoyed a heavier weighting in mortgages relative to its rivals. Asset quality in business banking was "good".

"There is some deterioration in credit quality but nothing that would give concern on an overall level or an individual basis," a spokesman said. "The housing market may be more subdued in 2002 but prospects are heavily underpinned by interest rates at a 35-year low, and comparatively good levels of affordability. We are not of the 'doom and gloom' school."

Despite the group's move to restrict deals on new mortgages and make existing home loans more competitive, its 25 per cent share of mortgage net lending seen in the first half of the year had been sustained in the second.

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