A&L reports growth in core markets

Amanda Jarvis

February 27, 2006

– Record mortgage lending of £11.1 billion
– Strategic targets hit – and new markets targeted

Alliance & Leicester has reported its financial results for 2005, with all strategic objectives having been met and further growth plans for the future announced.

Core operating profits were £548 million – £8 million higher than in 2004, with pre-tax profits at £547 million – slightly ahead of analysts’ predictions which averaged £540 million.* Total costs were lower than in 2004. A full year dividend of 51.5p per share has been proposed, 7% up on 2004 (48.3p).

Record mortgage lending of £11.1 billion in gross advances – 28% up on 2004 (£8.7 billion) – and a lower level of redemptions led to total net lending of £4.9 billion (£2.5 billion in 2004), growing the mortgage book to £33.1 billion. Lending to first time buyers increased to 28% (15% in 2004). Personal unsecured loan balances totalled £3.5 billion – slightly up on 2004 (£3.1 billion).

Alliance & Leicester branded products achieved over 2,000 Best Buy mentions in the national press during 2005 – more than any competitor for the second year running. Over 250,000 people opened an Alliance & Leicester current account during the year, bringing the total number of active accounts to 1.52 million, with over a million customers registered for internet banking. Savings balances totalled £20.6 billion – £700 million higher than in 2004.

More than 30% of all new business for the retail bank’s core four products – current accounts, savings, mortgages and loans – were generated on-line – up from 20% in 2004. 94% of customers rate themselves “satisfied” or better with the bank’s service for each of the core four products.

Commercial Banking also delivered strong growth in each of its core product areas. Business banking account openings totalled 24,300 – 48% up – due to the bank’s good value, market leading products, with Alliance & Leicester Commercial Bank being awarded ‘Best Business Current Account Provider’ for the third successive year by Business Moneyfacts. Cash sales were up over 20% to £66 billion and commercial lending balances increased by £900 million to £5.5 billion, with the majority of all new lending being secured.

The Group’s asset quality remains strong. The proportion of mortgages in arrears was 0.64%, lower than it was at the end of 2004 and significantly below the industry average of 0.93% (Council of Mortgage Lenders). The proportion of personal loan balances in arrears stands at 5.1% – a similar level to the end of 2002, up on the 4.2% it was at the end of 2004 and 30% better than the industry average (Finance and Leasing Association). Commercial lending non-performing assets stood at 0.32%, slightly better than in 2004.

Group chief executive Richard Pym commented: “Alliance & Leicester delivered a good performance in 2005. We hit our strategic objectives, delivered good financial results and put in place a number of actions which emphasise growth and development going forward.”

Alliance & Leicester plans to enter new markets in 2006 by offering secured personal loans and a range of specialist mortgage products in conjunction with partner organisations. There are plans for a new look and feel for the retail internet banking site, including enhanced security features. The internet banking proposition for business banking customers has also been improved, offering the best online functionality in the market, and new products will include an electronic pre-paid card for the business-to-business market.

The bank is investing in its branch network, with a major refurbishment programme which will introduce state of the art technology and a more relaxed retail feel to a further 50 of its 254 UK-wide branch network. As the UK’s leading provider of cash, Alliance & Leicester Commercial Bank is also exploring new options for business customers who deposit cash, including the use of cash deposit machines at Cash & Carry stores. The bank also plans to roll out at least four more Business Centres, adding to the five already open and offering relationship banking services to SMEs.

Richard Pym continues: “This is an exciting time for Alliance & Leicester and I believe the bank has never been in better shape. We have a sustainable business model to deliver future revenue growth and efficiency improvements. We have an unprecedented number of new developments planned and the pace of change is increasing as we become the UK’s leading direct bank”.

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