Halifax plans begging letters to clients

Halifax, Britain's largest mortgage lender, will write to more than 200,000 customers every month for a year to convince them to stay with the bank.

The former building society, which is feeling the pressure of competition, hopes to prevent existing customers defecting.

The bank also hopes to woo customers to an internet and telephone bank unveiled yesterday. IF - intelligent finance - aims to attract 500,000 customers in the first year.

Halifax's share of the mortgage market is declining. It once controlled 19% of home loans but last year sold just 6% of all mortgages taken out.

The move to write to Halifax's 2.5m customers is being led by Andy Hornby, the 32-year old head of Halifax's retail operations who joined from Asda last year. Mr Hornby also said he intended to "radically simplify" its mortgage products.

James Crosby, the chief executive, said: "The key is to improve customer retention. We're just contacting people and being in touch, something financial services companies haven't done."

The Halifax's plans pleased the stock market. Despite the fact that profits are holding steady at £1.7bn, Halifax shares surged 73p to 625p, continuing a rise which has added £4bn to the market value of the bank over the last three days. This is good news for the 3m people who still own shares in the bank after its conversion from a building society - although the shares are still worth 149p each less than when the building society demutualised in 1997.

The Halifax has also sought to bolster its board by appointing two younger non-executive directors - including the businessman behind the Carphone Warehouse, Charles Dunstone, 35 - and starting up an internet insurance venture with Peter Wood, the creator of Direct Line, who once earned £42m a year.

Halifax, which yesterday brought forward to 2002 its target for diversifying away from its core mortgage and savings products by 50%, is also preparing to offer banking and insurance facilities to small business customers through its internet ventures.

"All banks' share prices have been knocked by the new world economy. This has to be a display that the dinosaurs are fighting back," said John-Paul Crutchley, banking analyst at Dresdner Kleinwort Benson, an investment bank.