Alliance & Leicester forecasts flat revenue growth |
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Published
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Wed, 22 Jun 2005 00:05
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LONDON: The seventh biggest bank in the UK, Alliance & Leicester Plc, said it expects a flat revenue growth in the first half of the current fiscal, mostly on account of a slowing down in the mortgage market.
The bank stated the the first half revenue would be "broadly similar" to last year, indicating an industry trend that highlights a sharp slowdown in mortgage lending since the middle of 2004. Industry watchers say rising interest rates and a possible property market slow down are to blame.
It said there is a continued decline in its net interest margin (difference between the interest the bank pays to savers and the interest it levies on borrowers), a direct fallout of its strategy offering cheap unsecured loans to low risk customers.
The bank has something to cheer about -- bad debts. It said though its retail banking provisions are set to rise to 30 million pounds sterling in the first half, up from 18 million pounds sterling in the same period last year, it indicated a strong growth in unsecured personal loans and not a mere deterioration in credit quality.
Other U.K. banks do not seem to have this luxury. Many of them are saddled with increased number of borrowers. Barclays has said its bad loans were rising faster than expected because of a surge in credit card arrears. Even Lloyds TSB, HSBC and other banks too have indicated their bad loans are on the rise.
The bank said it is concerned about the slowdown in the housing market as indicated by the fewer number of housing related financial services it is selling. It felt the housing market is dominated by remortgaging rather than straight new mortgage loans as house-buying has slowed down.
Alliance & Leicester's gross lending for the first quarter was £1.5 billion, giving it a market share of 2.7 per cent. (Net lending £350 million, or 2 per cent market share.)
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