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Wednesday, 14 February, 2001, 10:19 GMT
Abbey posts record profits

Abbey could be fighting a losing battle against Lloyds if the DTI clears the deal
Abbey National, the UK mortgage bank, has reported a 17% rise in underlying pre-tax profit to a record 2.1bn ($3.05bn).

The results for 2000 were released a week ahead of schedule in order not to clash with an announcement expected from the Department of Trade & Industry on whether to refer Lloyds TSB's 19bn bid for Abbey to competition authorities.

Abbey is fighting the takeover attempt, prefering plans to merge with Bank of Scotland.

Abbey reported net mortgage lending of 3.2bn in 2000 giving it about 8% of the market.

Diversification

The bank continued to diversify away from mortgages and savings in 2000, with 53% of profits deriving from other businesses such as life assurance and wholesale banking.

Abbey said it expected non-mortgage and savings businesses to contribute 60% of profits by the end of this year and 65% by the end of 2002, reaching a diversification target one year ahead of schedule.

The diversification has come as a response to declining profitability in mortgages and savings, due to fierce competition.

In 2000, Abbey's mortgage and savings businesses recorded a 5% fall in profit, highlighting the need for further diversification and an alliance.

Chief executive Ian Harley said: "2000 has been a year of radical change in which Abbey National has executed plans on schedule, delivered industry-leading innovations and provided genuine competition.

"We enter 2001 in excellent shape, confident our our ability to continue to grow our business."

Propelled into Lloyds arms?

Abbey, which took over Scottish Mutual in 1992, said its early results announcement would give it more time to talk to key investors ahead of the DTI decision.

It is lobbying investors against a deal with Lloyds but analysts said Abbey would probably be propelled into the larger bank's arms if the DTI decided a combined business would not be anti-competitive.

Under this scenario, Bank of Scotland would probably walk away, analysts said.

They said the Scottish bank might then find itself courted by Barclays, which is thought to be seeking a substantial UK deal before launching a European expansion.

A combined Lloyds-Abbey would be the UK's second biggest bank, with about 27% of UK current accounts.

Legal experts said the chances of the deal being approved by authorities were about 50:50.

At 1010 GMT, Abbey shares were down eight pence at 1,217p.

Lloyds TSB had shed 6.5p to 707p and Bank of Scotland was also off 6.5p, standing at 755p.

Lloyds is due to report results on Friday.

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07 Feb 01 | Business
Abbey rejects Lloyds bid
08 Feb 01 | Business
Barclays seeks to get bigger
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