HBOS says trading is robust; profits in line with expectations

HBOS says trading is robust; profits in line with expectations

	Published : Wed, 21 Jun 2006 11:05 By : Phil Bateman Print this Story

LONDON - Banking group HBOS today said that it expects to announce a 7.4 percent increase in pre-tax profits for the full-year of 2005. The bank made these comments ahead of revealing its first half trading update.

"Current trading and financial performance at HBOS remains robust," the bank said. "We expect to continue generating earnings growth from broadly stable margins supported by a good contribution from non-interest income and cost management in line with our target for the year." The bank expects to announce pre-tax profits of £5.2 billion for 2005 about 7 percent more than the £4.84 billion that HBOS made last year.

Britain's biggest mortgage lender also said that its market share was more or less equal to what it had got last year; a figure of around 17 percent. However analysts say that HBOS' has not been able to cash in on the booming housing market. This is because the bank has decided to stick with a conservative policy on lending, meaning that it concentrated more on credit quality rather than volume.

"It all looks reasonably encouraging," said James Hamilton, an analyst with WestLB. "To say at this stage they are comfortable with (full-year) consensus earnings indicates to me that the first-half performance is at the very least in line with expectations." But Mark Thomas and James Hutson, of Keefe, Bruyette & Woods said they were disappointed with the update.

"We had been expecting a positive trading statement from HBOS, reflecting good improving mortgage volumes, continued good corporate asset quality, a good headline to income number from its corporate division and growth in equity-related sales to branch customers," they said. "In the event, the statement was both short and featureless and, as such, may be merely disappointing today."

These statements may be reflected upon in the light of the fact that HBOS share of new mortgages dipped to 11 percent in the second half of the year, when the housing market was booming. Shares in the bank were down 2 pence at 951 pence in early trading today.