B&B upbeat about mortgage market: H1 profits up |
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Tue, 09 Aug 2005 13:35
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LONDON: Mortgage lender Bradford & Bingley today provided one more indication that the property market is well past its trough and likely to resume its upward ascent. The bank reported underlying pretax profits of £150 million for the six months to June 30, up 8 percent from £139.4 million for the same period last year.
Ranking ninth among Britain’s largest banks by assets, B&B said cost cutting measures initiated last year had succeeded in lifting profits despite the overall slackness in the mortgage market.
| Chief executive Steven Crawshaw said that people are now upbeat about the second half compared to the uncertainty in the first quarter. Last week’s announcement of an interest rate cut is certain to bring the buyers back in the property market. However, lending volumes could still be restrained unlike the lending boom recently, he added.
B&B’s numbers appear to be very much in line with the expectations of analysts who had forecast pretax profits to be somewhere between £144 million and £153 million. The report disappointed only in net income (excluding the impact of disposals last year) which remained flat at £281 million despite 6 percent reduction in costs. Slowing volumes, dogging lenders for some months now, has also affected B&B’s performance.
Gross new home loans were 40 percent lower in this year’s Jan-June 30 period compared to the record £4.1 billion for the same period last year. Arrears levels were also increasing. Additionally, bigger players like HBOS and Northern Rock are offering serious competition to B&B.
The only plus of lending profits was because fewer existing borrowers switched out.
Another reason why B&B seems upbeat is that 20 percent of its portfolio of borrowers comprises ‘buy-to-let’ investors. This sector of borrowers is expected to outpace the regular mortgage market. Not all analysts will agree to that outlook.
The mortgage market had dipped to its lowest on the graphs during the downturn. As the property market is one of the prime movers of the economy the Bank of England’s Monetary Policy Committee had decided on a cut in borrowing rates in order to revive the market.
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