Abbey's challenges after 2008 surge

Published on Thursday 5 February 2009 20:56

SPANISH-OWNED Abbey predicted yesterday that this year would be "very challenging" following a storming performance in the UK mortgage market in 2008.

Abbey, owned by Santander, picked up more than one in four of all new home loans issued in 2008, it revealed yesterday, helping the bank to a 20 per cent jump in profit to 991 million (822m).

Antonio Horta-Osorio, chief executive of Abbey, said that, while the coming year would be "undoubtedly" a testing one, he was "cautiously optimistic" about the group's business prospects as it was continuing to benefit from the strength Santander.

Taking advantage of the collapse or near-collapse of many of Britain's banks, Abbey said that net mortgage lending jumped 28 per cent to 11.1 billion from 8.7bn in 2007.

That sent its net lending market share rocketing to 28.9 per cent from 8 per cent a year earlier and a traditional share of 9 per cent that had ranked it third in the UK market.

Santander bought Abbey for 9bn in 2004 following a successful three-year turnaround of the loss-making UK mortgage bank by investment bankers Luqman Arnold and Stephen Hester.

Hester is now attempting to revive the fortunes of Royal Bank of Scotland.

Abbey, which now also combines recent takeover Alliance & Leicester and the savings arm of failed bank Bradford & Bingley, said bad debts were rising as borrowers struggle with repayments.

The group has upped provision to cover bad debts, contributing to a 3.57bn (3.18bn) writedown at parent group Santander for 2008.

Savings were also up by more than half, boosted by a 29.9bn contribution from Alliance & Leicester and 20.9bn from Bradford & Bingley.