Core operating profits stand at £263 million, compared to £262 million in June 2004 on the same basis.* This is slightly ahead of analysts’ expectations of £257 million.
Underlying basic earnings per share are up at 43.2p, compared to 41.4p in June 2004. The Group has declared an interim dividend of 16.8p per share – 7% up on June 2004 (15.7p). Despite increased franchise growth, costs were lower than for the first half of 2004.
Mortgages performed strongly with gross lending of £4.1 billion and net lending of £1.6 billion – a market share of 3.8% compared with the bank’s 3.2% share of the UK mortgage stock. Overall mortgage balances grew to £29.8 billion, whilst unsecured personal loan balances were up £500 million since the end of last year, at £3.6 billion.
Customers opened 112,000 new current accounts in the first half of 2005, increasing the number of active current accounts to 1.47 million. Over a million of these are regularly funded, by an average of over £2,000 a month. Savings balances were up by £1.2 billion in the first six months of 2005, standing at £21.0 billion.
This growth has been delivered with strong asset quality. Just 0.68% of mortgages were in arrears at the end of June – the same as at the end of 2004 – and significantly below the industry average of 0.88%. Similarly just 4.2% of personal loan balances are over 30 days in arrears – stable compared to the end of 2004 – and 40% below the average for the industry.
An increasing proportion of new business is via direct channels, enabling Retail Banking to deliver growth at low unit costs. 35% of all sales of the bank’s core four products were via the internet in the first six months of 2005, compared to 20% for 2004 as a whole. When it comes to servicing, more customers are opting for ‘self service’ options for everyday banking.
Customers are choosing to route 70% of the 22 million phone calls via the interactive voice response system, rather than speaking directly to an operator. 750,000 customers are registered for internet banking – 50% up on the end of last year – and over 200,000 current account customers use internet banking each month. All intermediary mortgages are submitted via a bespoke internet application.
The bank offers a range of personal finance products, recognised by over 1,400 Best Buys in the first six months of the year and has won a number of awards, including ‘Best Current Account 2005’ from Moneywise.
Commercial Banking achieved 'good levels of growth'. Cash sales increased by over 25% to £30 billion, commercial lending balances increased to £5 billion and small businesses opened 10,500 new accounts - a 35% increase compared with the first half of 2004.
It says the partnership with Securicor has been key in winning new business in the cash market. In lending, the bank has started to build its presence in the Private Finance Initiative (PFI) market and is building on strong existing relationships with local authorities and other government agencies. It launched four new business centres during the first half of 2005 to support business banking.
Commenting on the interim results, Group Chief Executive Richard Pym said: "Alliance & Leicester has had a good first half year. We have delivered satisfactory financial results and grown our core businesses in slowing markets, maintaining a return on capital of over 21% for our shareholders and improving cost efficiency.
"Over the past few years our strategy has established a strong, growing balance sheet, excellent asset quality and good cost control. Over the next few years the pace of change will increase as we continue to develop Alliance & Leicester into the UK’s leading direct bank."
Commenting on the future, he said, “During the first half of 2005 we have made progress in planning and implementing initiatives which will provide further opportunities for revenue growth and cost efficiency in the future. These include the launch of the internet only ‘Moneyback Bank’, the creation of a PFI lending team and the launch of new business banking centres.
“In addition, our emphasis on simplification and direct banking will enable us to continue to improve our operating efficiency in the future, and we envisage further reductions in unit costs over the next few years. This will include focusing on creating a paperless Commercial Banking operation, continuing to grow the proportion of Retail Banking customers who purchase and service their financial needs via direct channels, and reducing the Group’s fixed operating costs.
“These initiatives will be implemented progressively over the next five years, at the end of which it would be reasonable to expect a Group cost:income ratio below 50%.”
