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Thursday, 17 February, 2000, 11:27 GMT
Abbey launches internet bank

Abbey National website Abbey National is looking for 1m online customers


The UK's second biggest mortgage lender, Abbey National, has unveiled plans for a new internet bank, called cahoot.

The news came as Abbey reported a 17% increase in 1999 pre-tax profits, up to 1.78bn from last year's 1.52bn.

Abbey said cahoot, available on PCs and mobile phones, aimed to be more than just a bank, and had already identified partners outside financial services, including Belfast-based BlackStar for videos, Swedish online retailer Boxman for CDs, Thomas Cook for travel and Dell for computers.

"We're already talking to venture capitalists and other potential partners who are interested in investing in this business," said chief executive Ian Harley.

TV access

"Abbey National is making significant investments in e-commerce. In October, the group added digital TV, through Sky's interactive digital TV channel, Open, to its existing range of distribution channels.

"By the end of 2000, customers in over 4m homes will be able to access their accounts via cable or satellite digital TV."

Mr Harley said Abbey aimed to have more than 1m new customers registered for its e-commerce ventures within the next 12 months.

The company plans to spend 200m on e-commerce in the next two to three years.

"These results, combined with our e-commerce initiatives, demonstrate how we are radically changing our business to compete aggressively against new entrants, who will find life more difficult with one of the UK's most trusted brand names tackling them head on," said Mr Harley.

Abbey's move comes as UK financial services groups rush to set up stand-alone internet banks to compete with start ups such as First-e and Egg.

Last week Lloyds TSB, the UK's biggest retail bank, revealed plans for a pan-European online bank, while the UK's biggest mortgage lender Halifax is due to flesh out plans for its online arm Greenfield.co, on Friday.

Abbey 'too small'

But not all analysts are convinced Abbey has the clout to succeed online.

"The problem with Abbey National is it's not large enough to actively compete with the likes of Lloyds TSB to acquire customers on the internet, but at the same time it doesn't have a small niche business," said Geoff Miller of Exeter Asset Management.

"I would say that Abbey has got to do a deal with somebody - either it has got to acquire someone or it has got to be acquired."

But Mr Harley played down any suggestions of a merger.

"It's not high on my list of priorties," he said.

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See also:
03 Jan 00 |  Business
Lloyds TSB goes European
29 Sep 99 |  The Company File
Co-op unveils Internet bank
15 Sep 99 |  The Company File
Virtual bank gets major deposit

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