Abbey National reports 2% drop in profits

Abbey National bank today reported a 2% fall in profits as the collapse of the US energy giant, Enron, took its toll on its business banking unit.

Pre-tax profits dropped to ?1.9bn in 2001 from ?1.97bn a year earlier as Britain's second biggest bank was forced to write off ?256m, including ?95m, in its corporate banking division, an enormous increase on the ?34m in write-offs in the same unit a year earlier.

Abbey chief executive Ian Harley said 2002 would be another challenging year as the group made changes within corporate banking.

"We are refocusing the wholesale bank and reducing its risk profile," he said. "This, combined with the uncertain outlook for the US economy, is expected to constrain profits growth in the wholesale bank in 2002."

Mr Harley said Abbey had appointed a new managing director to oversee the changed strategy.

"Capital will only be invested in those businesses in the wholesale bank that are capable of delivering attractive returns," Mr Harley said. Abbey, which fought off a takeover bid from Lloyds TSB last year, said its showing on the high street had been strong. It reported its best performance in the savings market since 1994 and said it had taken on the Big Four banks by opening 450,000 personal current accounts and increased its business banking account base by 55%.

Abbey confirmed that it is in the market for acquisitions in the UK mortgage and life assurance sectors.

"There is more consolidation to come in the UK, both in the banking sector and the [life] insurance sector and we are watching both sectors with interest," Mr Harley said.

There has been speculation that Abbey is interested in buying other financial companies after having fended off Lloyds. One target could be Alliance & Leicester, a smaller mortgage company. Mr Harley said in addition to the UK, Abbey was looking for opportunities to expand internationally.