Alliance & Leicester delivers continued strong growth
Alliance & Leicester today announces its Interim Results with profits for the first six months of the year totalling £295 million – 10% up on the first half of 2006 – slightly ahead of analysts’ expectations. The Board has declared an interim dividend of 18.8 pence per share, up 7%.Strong performance in all core product areas contributed to the results, with the Group’s market share of new business ahead of its existing share of stock in each of them – demonstrating consistent growth.
In Retail Banking, even more customers are opening an Alliance & Leicester current account, with 170,000 new accounts opened in the first six months of 2007, 12% up on the first half of last year, bringing the total number of active accounts to 1.68 million. Net mortgage lending totalled £2.2 billion in the first half, taking total mortgage balances over £40 billion for the first time ever. New unsecured personal loans of £1.4 billion were made, 22% up on the first six months of last year, bringing total balances up to £3.8 billion. Savings balances increased by £600 million to £23.3 billion, with the growth largely coming from ISAs and the market-leading Direct Saver account. Asset quality remains strong, with a reduction in the proportion of balances in arrears for both mortgages and personal loans compared with the end of 2006.
Commercial Banking, which accounts for around a third of Group profits, saw core operating profit up £27 million to £96 million. The number of new business banking current accounts opened was 29% up on the first six months of last year, at 16,600. New commercial loan facilities totalled £1.8 billion from January to June, bringing total balances up to a record £7.3 billion. Treasury profits increased by £3 million to £24 million.
Group Chief Executive Richard Pym, delivering his last set of results before handing over to his successor, said: “Alliance & Leicester has delivered a very good set of results, with good revenue growth, lower costs and strong asset quality. This has been achieved by offering great value products to both our personal and business customers in a very competitive market. Yet despite investment in a number of new markets, core operating costs are £1 million lower than a year ago.
“Alliance & Leicester’s strategy is continuing to deliver great value for our customers and our shareholders. We continue to achieve more ‘Best Buys’ in the national press than our competitors. Over the past five years our share price has outperformed the banking sector by over 50% and we have generated a total shareholder return of over 70%.”
New developments
The first half of 2007 has seen a wide range of developments come to fruition, including new market leading products, further evolution in technology and enhancements to distribution, with early results proving encouraging.
New Retail Banking products include the launch of PlusMortgage – a combined mortgage and unsecured loan - and Premier 21 - a current account offering 10% interest for those school leavers who don’t go on to full-time higher education. The Free Business Banking Account for businesses with a turnover of up to £1 million was enhanced to offer even better value. A specialist contract hire product has been introduced and a pre-paid debit card product has been launched with contracts agreed with customers in the staff incentive, telecommunications, local government and financial services sectors.
Alliance & Leicester’s technology continues to prove popular with customers, with an increasing proportion (41%) of all current account, savings, personal loan and mortgage sales coming via the internet. A third (30%) of new business banking applications now come online, an impressive total since this option has been available for less than a year. The numbers of customers registered for and using online banking continues to grow.
Distribution options have been improved and extended for customers. The Group’s 2007 refurbishment programme for its retail network is now more than half completed which includes the installation of deposit taking ATMs. A third of customers (34%) are choosing to use these machines for card based transactions that were previously handled at the counter, thus freeing up staff to spend more time helping new and existing customers. The retail network can now be used by business banking customers for the first time, and bill payment customers can now access the 17,000-strong payzone network as well as the Post Office.
New ventures in Commercial Banking include the acquisition of a majority stake in a commercial property finance business and the first equity stake in a Public Private Partnership company in the health sector. Other developments include the negotiation of a new cash handling contract with the Post Office.
Commenting on the results, David Bennett, who takes over the reins as Group Chief Executive from today said: “Alliance & Leicester has a clear strategy which is delivering good results. The Group has been transformed over the past few years and will continue to evolve in line with our strategy of offering great value for our customers and sustainable returns for our shareholders. Our success in a diverse range of markets provides a strong and broad base for continued growth into the future.”