The former building society had earlier said it was considering how to use the surplus cash and would put proposals to shareholders next year.
Woolwich increased headline profits in the six months to the end of June by 13 per cent to pounds 214.5m, just beating the forecast it made when announcing conversion details. But the new bank spent pounds 26.7m on converting from a mutually owned building society to a bank, reducing the profit before tax to pounds 187.8m and the increase to just 2.5 per cent.
Most of the improvement in headline profits was due to a reduction in the level of bad debts and a drop in operating expenses. Operating income was only 2 per cent higher at pounds 395.4m and interest income was almost unchanged at pounds 302.2m after deducting the cost of special offers which doubled to pounds 30m.
Income from commissions, fees and other sources grew by 9 per cent to pounds 93.2m. Their contribution to operating income as a whole rose from 22 to 23.6 per cent of operating income.
Fees from insurance rose to pounds 30m, while those from the investment side of the business, especially unit trust management, increased to pounds 24.6m. Lending fees increased to pounds 15m, while the estate agencies and surveying side earned slightly less than last year at pounds 23.1m.
Woolwich's share of the new mortgage market, almost 10 per cent a year ago, fell to 4.6 per cent as it cut back on its special offers.
Investment column, page 16