HBoS ditches £400m private firm portfolio

HALIFAX Bank of Scotland is set to offload a £400 million portfolio of investments in private companies.

The Edinburgh-based bank, which unveiled a 51 per cent fall in underlying pre-tax profits last week, is seeking to shrink its balance sheet and withdraw from some areas of activity.

It has asked UBS to raise a fund from private investors to acquire part of its stake in a range of private companies.

Among firms that may be included are Keepmoat, a renovator of social housing, and Ainscough, the UK's biggest crane hire operator.

HBoS is still expected to retain an interest in the operations, which are expected to number fewer than half a dozen.

In a statement, HBoS said: "The next stage in the evolution of this integrated finance strategy is the creation of an integrated finance fund enabling other investors – typically long-term partners of Bank of Scotland – to invest alongside the group in specific companies the bank has an ongoing relationship with.

"Whilst bringing outside investors into this fund, Bank of Scotland will continue to maintain a significant interest in the fund and its underlying investments."

The move comes after the bank last week said it had taken a £1.1 billion hit from the credit crunch in the first half of the year, with profits sliding to £1.31bn, compared to £2.96bn in the same period last year.

It came a day after Lloyds TSB said its pre-tax profits dropped to £599m in the first half, compared to £1.99bn in the same period last year. Alliance & Leicester rounded off the gloomy week for the financial services sector with the announcement that its pre-tax profits had dropped to only £2m in the first six months of the year, down 99 per cent year-on-year.

Further signs of the banking turmoil are expected to come later this week, with RBS's half-year results on Friday widely forecast to show the biggest loss in UK banking history.

Analysts expect the Gogar-headquartered firm to post a loss for the first half of between £1bn and £1.5bn.

Chief executive Sir Fred Goodwin is under pressure to deliver £4bn of disposals by the year-end to offset the writedowns.