Wednesday, August 5, 1998 Published at 11:48 GMT 12:48 UK
Business: The Company File
Good year for 'go it alone' Woolwich
It has been a turbulent year for the newly converted banks
Woolwich has played down speculation of a possible merger with its rival, Alliance & Leicester, as it reported a sharp rise in half year profits.
The building society turned bank, which floated on the stock market one year ago, has been touted as a possible partner for the A&L.
A&L said reports were 'speculative' but refused to deny that it was interested in a deal.
However, with a good first year as a plc, Woolwich executives talked up the benefits of their go-it-alone strategy.
Group operations director Lynne Peacock said: "If you look at the facts there is no clear evidence that mergers of similar companies are actually delivering enhanced value.
"I believe we already have a strategy that will deliver increased shareholder value."
The company also said it was "reaping the benefits of the restructuring we managed last year and this has contributed to the significant reduction in the group's cost to income ratio."
Leap in profits
Profits before tax in the six months to June 30 rose to £240m from £187.8m a year ago. The figures were at the top end of analysts' forecasts.
Last year's profits were held back by the £26.7m flotation costs. Underlying profits were 12% ahead.
Net interest income from mortgages and savings rose from £302m to £319m. Other income, such as earnings from Peps and unit trusts, rose from £93m to £113m.
The improved result helped Woolwich lift its dividend to 3.5p a share from 3p a year ago.
The bank's share of the mortgage market fell as former building societies faced stiff competition from the remaining mutuals.
Net lending fell from £520m to £230m as its market share fell from 4.6% to 1.5%.
Its share of the retail savings market also fell, from 3.9% to 3.6% as savers moved money elsewhere following conversion.
Ms Peacock said the mortgage figures reflected the turbulence in the market in the wake of the conversions.
She said the bank's market share had been on an improving trend since the turn of the year.
Finance director Robert Jeens said he expected net-interest margins to continue to decline in the second half, but this should be offset by growth in new business areas and falling costs.
"The real engines for growth is in our diversification activities," he said.
"And at the same time we're continuing to bear down on our costs."
Woolwich also unveiled plans to buy back between £150m-£200m of its shares, depending on market conditions, during the second half.
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