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Tuesday, 31 July, 2001, 15:51 GMT 16:51 UK
Halifax internet bank disappoints
Halifax chief executive James Crosby
James Crosby: "Delivering on promises"
Mortgage giant Halifax, reporting a 5% slide in profits, has admitted its internet banking arm, Intelligent Finance, has missed customers targets.

Intelligent Finance, which was plagued by delays ahead of its launch last year, had attracted just 140,000 completed balance accounts by the end of June, Halifax said.

And, because of delays ahead of the division's launch last year, Halifax has been forced to invest 140m in the division, 40m more than originally forecast.

But Halifax said that, thanks to buoyant mortgage business, it was confident that Intelligent Finance would hit profitability in 2003.

"Whilst our original customer targets are now unrealistic, our balance sheet ambitions, and most importantly our target of delivering profits for the first time in the second half of 2003, can now be reaffirmed with confidence," chief executive James Crosby said.

Difficult market

Intelligent Finance's 7% share of UK net mortgage lending in the first half of the year reflected a drive by Halifax, the country's largest mortgage lender, to retain top-ranking.

The bank as a whole claimed 25% of gross mortgage lending in the UK over the six months, following a shake-up designed to improve retention of existing customers.

But "short term margin pain" incurred competing in the cut-throat mortgage market helped profits fall to 839m in the six months to 30 June, compared with 885m during the first half of last year.

The difference between the interest rates Halifax offers savers, and the mortgage rates it charges borrowers, fell 12%.

And Halifax warned that the UK economic slowdown would feed through into slower growth in house prices.

"The housing market... is likely to settle back to trend performance," chief executive James Crosby said.

'Transformation' drive

But the results were well received by investors, who were warned last year that efforts to bolster mortgage takings, and diversify into other markets, would hit earnings.

Halifax shares, which have outperformed the UK banking sector average by one quarter so far this year, stood 6.8% higher at 820p at 1400 GMT (1500 BST).

Besides a rise of more than one half in mortgage lending, sales of Halifax credit cards quadrupled to 430,000, while the number of new bank accounts opened doubled to 460,000.

In the long-term savings operations, including the Clerical Medical and St James's Place Capital businesses, product sales rose by one half to 499m.

"Halifax is in the middle of an extraordinary transformation," Mr Crosby said.

"This year we promised outstanding sales, very tight cost controls and exciting progress in our new ventures.

"These results show we have delivered line by line on our promises, and in a manner which will redefine many of our markets."


Tuesday's briefing revealed a charge of 21m for costs incurred through the merger with Bank of Scotland, which was approved by both sets of shareholders last week.

The move will boost Halifax's efforts to diversify into small business and corporate banking, while Bank of Scotland will gain retail deposits and branches.

And Halifax also highlighted the quality of loans made, reporting falls in the levels of arrears, and the proportion of homeowners borrowing the equivalent of 90% or more of the value of their properties.

"At this stage in the economic cycle quality is of the utmost importance, and our experience here remains robust both for past and current lending," Mr Crosby said.

See also:

19 Jul 01 | Business
BoS/Halifax merger gets go-ahead
04 May 01 | Business
BoS and Halifax agree merger
04 May 01 | Business
HBOS: The merger benefits
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