HBOS shares up as Hornby talks up earnings

HBOS said yesterday it was on course to beat its forecasts for annual earnings per share, sending its shares up 3.5 per cent.

As rival Royal Bank of Scotland met its shareholders in Edinburgh, HBOS top brass were in Brighton for its annual meeting, a policy to spread its meeting to different parts of the UK.

The chief executive of Britain's fourth-biggest bank, Andy Hornby, said that it was confident of delivering underlying earnings per share "ahead of the current market consensus".

In March, HBOS posted a 19 per cent jump in annual pre-tax profits to 5.7 billion, unveiling a full-year dividend up 15 per cent to 41.4p, via a 27.9p final, and a 550 million payout in cash, shares and options to the group's 65,000 staff.

He said yesterday its retail banking division had performed well with good growth in savings and for banking products. He admitted it did experience a decline in its share of the lending market due to the timing of the end of term on some of its mortgage products, but said it would return to its normal range of between 15 and 20 per cent in the second half.

Shares in the largest provider of saving products in the UK rose 37p to 1,094p, as Hornby said that the overall credit environment had remained strong, although he added it had maintained vigilance on unsecured lending such as credit cards. During 2006, the bank racked up provisions on bad debts of 1.74bn, representing 0.48 per cent of average customer advances.

"HBOS has made a good start to the year," he said. Current market consensus is that HBOS will report earnings per share of 107.4p in the full year.

"Trading so far this year across the breadth of the business confirms the bank's confidence that 2007 will be another good year for sustainable value creation for shareholders," said Hornby.

Insurance sales showed strong growth since the start of the year despite a fall-back in prices, with household policies seeing particularly strong volume growth, he added.

The division took a knock last year after a decline in repayment insurance sales following a raft of criticism regarding the industry, which was subsequently referred to the Competition Commission for investigation by the Office of Fair Trading.

He added that its investment arm was set to deliver double-digit growth while its international business had experienced "encouraging growth" in both lending and deposit taking.

HBOS has already returned 200m to investors this year, and Hornby said it would continue with its share buyback programme as it continued to generate surplus capital.

"Trading so far this year across the breadth of the business confirmed our confidence that 2007 will be another good year for sustainable value creation for shareholders," he added.

"We are confident of delivering underlying earnings per share ahead of the current market consensus".