Union fury as 1,000 more jobs are axed at Abbey

A further 1,000 jobs are to be axed at Abbey National, taking the total toll on headcount at the struggling banking group to 4,000 as the new Spanish owners try to cut costs drastically.

The new job cuts infuriated finance union Amicus which described them as "an example of worse practice" and "typical of the way" the Spanish bank Santander has handled the bank since it took control in November.

Abbey - which said Amicus was not the recognised union at the group - defended the scale of the redundancies. It insisted it had consulted in-house union Angu, which represents 12,000 of the 25,000-strong workforce.

Linda Rolph, general secretary of Angu, said the cuts were a "shame" and admitted they were creating uncertainty. Francisco Gómez-Roldán, the Santander executive parachuted in to run Abbey, said: "We want to be a strong competitor. We have to manage the cost/income ratio".

Abbey has one of the highest cost/income ratios - a measure of efficiency - of any of the high-street banks at 62% compared with around 42% for its rivals, according to Mr Gómez-Roldán.

While he could not give firm assurances that there would be no further cuts, he indicated that he felt 4,000 would be the bulk of the scale-back. The previous target for job cuts had been 3,000 - 2,400 of which have been identified and of these 1,000 people have already gone.

The extra cuts, which are expected to go from central functions rather than the revamped branches, might allow Abbey to beat its original target to cut costs by £150m.

Santander has just embarked on a rebranding of Abbey, introducing its red flame logo on to the high street to coincide with a new advertising campaign.

Mr Gómez-Roldán said that Abbey was unlikely to launch a new range of products. "The product ranges are really good. What is not so good is the business productivity and the marketing," he said.

The new job cuts were revealed as Santander announced its first quarter profits had risen by 38% to €1.2bn (£820m) of which Abbey contributed €153m for the first time. No comparable profit figure for Abbey was given.

Half of the overall profit growth was generated by Abbey and left analysts divided over the performance from the Spanish bank.

Analysts at Keefe, Bruyette & Wood, said: "Overall, the results are of weaker quality than we were expecting, although still healthy. Better than estimated trading income and lower provisions were partly offset by higher costs, while at Abbey weaker than expected revenues were offset by better costs and lower provisions."

At Dresdner Kleinwort Wasserstein the verdict was "all round the numbers are strong".

Mr Gómez-Roldán said it was "too early for the changes we are making to have a meaningful impact on sales performance but the first quarter results nonetheless include some encouraging early signs".

He highlighted an improvement in mortgage approvals even though net lending was still negative in the first quarter of 2005.

Provisions for loan losses from mortgages were at historically low levels, Abbey said. However, provisions for non payment of unsecured loans had increased although the bank said these were offset by the winding down of the wholesale banking positions.

Santander's shares - which will eventually be listed in London - fell 1.6% to €9.08.