A&L profit thanks to commercial banking

A&L on profit roll thanks to commercial banking growth

Commercial banking has played a key role in Alliance and Leicester’s forecast of an operating profit of around the £600 million mark for the first half of this year.

Group finance director and chief executive elect, David Bennett told analysts in his pre-close trading briefing this week that commercial banking business had done “very well”. The bank’s commercial lending balances stood at £6.9 billion at the end of March representing a £400 million rise on the end of December. He reported that the number of business bank accounts opened for the first quarter of this year was up on the same period for the previous year.

“The revenue growth rate in the first half of 2007 is expected to be
significantly higher than that achieved in similar periods in recent years. This reflects the strong franchise growth in our core products over the past few years and a more stable net interest margin,” said Bennett.

He added that from this April the bank had started to underwrite its buy-to-let mortgages, which were previously off balance sheet with Lehman Brothers, and was offering loan-to-values of 85%.

He said that interest margins for the first quarter of 2007 were lower than 1.3% over 2005. He said this was due to lower retail banking margins and

lower unsecured lending but this had been partially offset by increased commercial banking income.

Bennett stressed that asset quality remained strong with lower commercial banking impairment in the first half of this year than the last half of 2006.

“We expect the group’s core operating profits to be around the top quarter of analysts’ forecasts. We have made a good start in 2007 with revenue, costs and asset quality in good shape,” said Bennett.

Bennett will take over from Richard Pym as group chief executive on 27th July when the bank announces its results for the first half of 2007. Chris Rhodes, currently managing director of retail banking, will become group finance director. The retail banking business will report directly to David Bennett and the commercial banking business will continue to report to Richard Banks.

Date: 14/06/07