Right strategy makes HBOS one to invest in for the long term

Tube contracts do not make Atkins a buy; McBride yet to clean up on growth prospects

Can a big bank be both the customer's friend and the shareholder's friend? Few would say so, but James Crosby, the chief executive of HBOS, thinks his company's interim results yesterday prove it is managing to be just that.

He might not be quite as wrong as you'd suspect. HBOS made profits of more than £8m a day in the first half of the year by attracting new customers to its cheap and simple mortgage and savings products. Already the UK's biggest provider of home loans, HBOS took 31 per cent of new mortgage business in the six months to 30 June, well ahead of its target of 25 per cent.

The total profit (£1.5bn) was ahead of the City's forecasts and went a long way to reassuring investors that Mr Crosby has plumped for the right strategy, which has the obvious consequence of eroding margins in the retail banking side of the business. HBOS has asked its shareholders to forego the sort of dividend growth on offer elsewhere in the banking sector, and to trust the management to invest in growing the business.

A £1.3bn equity fund raising earlier this year to bolster the group's financial clout looked a bit cheeky at the time, but in retrospect looks something of a masterstroke. It has meant HBOS's life insurance and pensions arm, built around the Clerical Medical brand, will be able to remain robust despite the market downturn. Mr Crosby professed himself happy with the solvency of HBOS's life funds and said he did not expect to be forced to sell equities. Indeed, the group's financial strength means it is more likely to recapitalise its life funds than throw away the chance to benefit from a market rebound. The present market turmoil is only likely to mean that the strong get stronger at the expense of the weak.

On the negative side, HBOS owns a majority stake in St James's Place Capital, the posh fund manager that has hit on hard times and whose woes took £46m from group profits. But this is outweighed by the growth in business banking, where HBOS is proclaiming itself a "fifth force" to rival the UK's four biggest banks. Margins in business banking have helped offset declines in the retail side. Meanwhile, cost savings from combining the old Halifax and Bank of Scotland networks are on track. The shares are cheap compared with their sector, and should be bought for the long-term.

Tube contracts do not make Atkins a buy

While WS Atkins' balance sheet and accounting policies may positively sparkle compared with peers such as Amey, the company has been caught up in the overdue derating of the support services sector. Its shares have halved since March, and still remain out of vogue.

The company's skills are mainly in white-collar areas such as project management, design and engineering consultancy for companies and the public sector.

Full-year results out yesterday from the group may have bolstered its reputation for prudent accounting – no bad thing in these markets – but they still managed to disappoint. Happily for Atkins, it already booked the costs of bidding for new contracts through its profit and loss account, rather than deciding to call it investment and writing it off over years. So there were no major surprises from the implementation of a new accounting standard telling companies how to account for the Government's complicated Private Finance Initiative projects and the like.

That said, the giant costs from three ongoing contract negotiations – including two for the London Underground privatisation, which it hopes to wrap up in the autumn – cost it £8.9m in the last 12 months.

The new chief executive, Robin Southwell, has spent heavily on a new computer system and that, plus a downturn in the group's telecoms infrastructure consultancy business, has hit margins hard. Adjusted pre-tax profits for the year to end-March fell to £34.3m, from £36.5m, on turnover of £806.3m.

Atkins seems poised for improvement this year but, though the shares were up 6.5p to 316.5p yesterday, investors may want to wait to be sure. The lucrative Tube contracts have to finally bear fruit. And the company also needs to conclude its search for a new finance director. Until then, there is likely to be better value elsewhere in the stock market.

McBride yet to clean up on growth prospects

Forget the "Daz whites challenge". Stop "messing about with Persil". For cash-strapped mums nationwide, the unsung hero of supermarket soapsuds is actually McBride.

McBride is Europe's biggest supplier of own-label detergents and other household products. It came back to the market last year after lengthy, on-off bid talks finally failed. And its shares have been among the best performers this year, up by a half despite all the stockmarket turmoil.

The problem is that the own-label market remains stubbornly flat at around 25 per cent. Why? Because the big boys of household care, such as Unilever and Reckitt Benckiser, are putting more money than ever behind the advertising of their power brands.

Now McBride is looking to Europe for growth. Sales on the Continent have crept up to more than half of the group's revenue and should rise further.

In a trading update yesterday, the company said it would meet analysts' forecasts of £17.5m pre-tax profits for the year to end June.

But the growth is unexciting. Though the group has put a problematic joint venture behind it, and though its shares (up 0.5p to 59p) are hardly expensive, shoppers may find better value in the detergent aisles than from the shares.