HBOS unveils £750m buy-back

HBOS Predicted its annual profits would beat market forecasts and said it would return £750m to shareholders, sending its shares 4 per cent higher yesterday.

HBOS Predicted its annual profits would beat market forecasts and said it would return £750m to shareholders, sending its shares 4 per cent higher yesterday.

The bank expects to "comfortably" beat the analysts' consensus of £4.6bn for pre-tax profits excluding exceptionals this year, up 17 per cent from 2003. James Crosby, the chief executive, said trading and profit margins had been better than expected, while cost increases would be "substantially" below the bank's target of 5 per cent due to a better performance in its retail operations.

HBOS plans more aggressive marketing campaigns to boost its market share of current accounts, credit cards and investment products. It also said it would buy back up to £750m of shares next year and further buy-backs could follow.

Mr Crosby was optimistic about the UK economy, predicting it would drop to only its long-term growth rate. He added: "Our business will show healthy growth, nevertheless the tempo will slow along with the economy." He was sanguine about the housing market - HBOS's forecast is for house prices to fall 2 per cent next year - saying it would not have a "significant" impact on earnings.

The new accounting standards that take effect next year will reduce basic earnings per share by 3 per cent and underlying EPS by 5 per cent, Mr Crosby predicted. HBOS shares closed up 30p at 806p.