A&L's new team tries to charm City

Alliance & Leicester tried to convince the City yesterday that it had a coherent long-term strategy, pledging to boost its share of the small business market and win more current account customers.

The former building society claimed that it was in a "new chapter" of its evolution and insisted that the £5m rise in its interim profits was "very satisfactory" given the competition in the mortgage market.

Richard Pym, finance director, said that the bank had avoided the war for mortgage business, and had good customer retention figures.

But some City analysts believe that the new management has little option but to prepare the bank for sale in two years' time when it loses the protection that it received on conversion from a building society.

The bank won a £15m tax rebate over a claim by the other three building societies which converted at the time - Northern Rock, Woolwich and Halifax - that they should be able to claim corporate tax relief on the costs of conversion.

Mr Pym acknowledged that the bank is likely to charge customers for withdrawing money from some of the 53 new cash machines it plans to install during the year.

Most major banks have decided to stop charging for cash withdrawals, but Woolwich is imposing fees for some withdrawals from convenience sites in locations such as corner shops.

The new management team, led by managing director Peter McNamara, announced a new strategy earlier this week and promised to outline plans to cut costs in October.

The bank reported half-year profits of £252m to end-June, incurring costs of £5m on its internet banking operation. The dividend rose 13% to 10.7p. The shares fell 10.5p to 486.5p.

The bank, which intends to enhance its internet operation by year-end, said 10% of unsecured loans were being processed over the net.

Richard Coleman, banking analyst at ABN Amro, noted that the bank had several distinct businesses: Girobank, mortgages and consumer credit. "There is a break-up story here. It is very likely it will happen sooner or later."