Abbey set to unveil profits of £600m

Published on Sunday 5 February 2006 01:10

HIGH Street banking giant Abbey will reveal profits of close to £600m this week, reversing three years of heavy losses, following a turnaround imposed by its Spanish owners.

Abbey chief executive Francisco Gmez-Roldn, who was drafted in following Santander Central Hispano's takeover of the group in 2004, will unveil the figures on Wednesday.

Following savage job cuts across the group, Gmez-Roldn is expected to show that the mortgage and savings bank has beat its target of cutting costs by 200m this year, while stabilising revenues.

It is also understood that there are still no plans to sell the company's Glasgow-based life assurance businesses, despite continued industry speculation to the contrary.

The profits come after Abbey announced plans last week to return to the credit card market, roughly 18 months earlier than had been expected.

One banking analyst said: "It seems the Santander turnaround is going to plan. They're already ahead of the original target on cost-cutting, which is making them more competitive again."

Abbey claimed to have edged back into the black last year, but the introduction of the new IFRS accounting rules prompted a substantial restatement. That pushed the group to a full year loss of 213m. In July, Abbey reported a half-year profit of 294m, measured on the same basis. It is understood that momentum has been maintained in the second half.

Santander has set Abbey a target of growing revenues by 5% to 10% a year for each of the next three years. It has also to reduce its cost-to-income ratio - a key measure of a bank's efficiency - to 45%. Abbey's retail bank was operating at a cost to income ratio of 61.5% last year, far higher than any of its high street rivals.

Analysts believe Abbey is on track to meet all its financial targets.

Although the group originally planned to make 100m of savings in 2005, that was bumped up to 150m last May, then 200m at the third-quarter trading statement.