Sant Uk.10te% Regulatory News (SAN)

27 Apr 2007 07:30

Abbey National PLC27 April 2007 Good start to third year of integration London, 27 April 2007 This statement provides a summary of the business and financial trends for thethree months to 31 March 2007. Unless otherwise stated, the trading (1) resultsof Abbey are compared to equivalent results for the same period in 2006excluding the results of the sold life companies which have been accounted foras discontinued operations. The first quarter results of Santander are also released today and can be foundon www.santander.com. Abbey's first quarter performance, on a Group basis, isincluded within Santander's financial statements. Highlights First quarter highlights include: • statutory profit before tax from continuing operations was significantly aheadof the first quarter 2006; • trading profit before tax (1) increased substantially, with revenue growth andcost reduction resulting in operating jaws (2) of 11%; • trading income up 7% represents a further improvement on the 5% growthreported last year. Abbey has benefited from solid asset growth and improvedretail spreads resulting in double-digit growth in net interest income, withmodest growth in non-interest income; • solid new business performance, continuing to balance volume growth andprofitability. Mortgage gross lending was ahead of the same period last year,whilst inflows into profitable Abbey branded savings accounts and directinvestment sales were up 60% and 27% respectively. Bank account balances werealso up 10%; • trading expenses were over 4% lower due to on-going cost reduction activity; • provisions broadly in line with the same point last year; and • a reduction in the trading cost: income ratio from 56.5% in the first quarterof 2006 (2006 FY: 55.5%) to 50.7%. (1) Trading profit before tax is management's preferred profit measure whenassessing the performance of the business. It is calculated by adding backreorganisation expenses and other changes from profit before tax. (2) "operating jaws" represent the difference between revenue and cost growthrelative to same period last year. Comment "Abbey has made a solid start in the first quarter. We've maintained themomentum established last year, with revenue growth increasing to 7% helping toreduce our cost : income by a further 5 pp. We remain on track to meet our stated targets." Antonio Horta-Osorio, Chief Executive Financial results Abbey statutory profit before tax for continuing operations and profit after taxwas ahead of the same period in 2006. Trading income: Net interest income was well ahead of the first quarter of 2006 reflecting goodperformances in both Retail Banking and Wealth Management. Retail Banking netinterest income was up, driven by asset growth of over 8% and strong marginmanagement. In total, the Retail Banking spread is 3bps better than at the samepoint last year, with improved liability spreads offsetting asset spreads.Wealth Management also delivered strong growth in the first quarter reflectingan increase in balances and margins. Non-interest income was slightly ahead of the same period last year. FinancialMarkets delivered robust growth driven by an increase in risk managementopportunities given volatile markets. In Retail Banking non-interest income wasslightly lower compared to the prior year due to lower current account charges.This was partially offset by higher fee income from investment and protectionproducts as a result of an uplift in sales volumes and the new distributionagreement with Resolution. Expenses: Trading expenses were over 4% lower than the first quarter of 2006, with themajority of the savings relating to employment costs driven by headcountreductions predominantly in 2006. Provisions: Retail Banking provisions were broadly in line with the first three months of2006 but slightly ahead of the fourth quarter of 2006. This increase is in linewith expectations and was driven largely by the unsecured personal loanportfolio. We expect the level of provisions to be broadly stable throughout2007. Underlying credit quality is strong across the portfolio. There has been anincrease in stock of properties in possession to 528 (Qtr 1 2006: 444) from lowlevels, and broadly in line with the Council of Mortgage Lenders (CML) averages.In terms of 3 month plus arrears, there has been a reduction to 7,061 (Qtr 12006: 7,887), and performance remains better than the industry, and has beensince 2003. The average loan to value (LTV) on new business and stock remainedlow at 64% (Qtr 1 2006: 59%) and 45% (Qtr 1 2006: 45%) respectively. Reorganisation expenses and other charges: Restructuring costs were consistent with the first three months of 2006. Business flows Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 2006 2006 2006 2006 2007Gross mortgage lending (£ bn) 7.0 8.9 8.2 8.5 7.5Capital repayments (£ bn) 5.6 6.1 6.4 6.7 6.2Net mortgage lending (£ bn) 1.4 2.8 1.8 1.8 1.4Stock (£ bn) 95.2 98.1 99.9 101.7 103.1 Market share - gross lending 9.5% 10.4% 8.9% 9.1% 9.4%Market share - capital repayments 10.9% 10.6% 10.2% 10.7% 11.3%Market share - net lending 6.1% 10.1% 6.0% 5.8% 5.4%Market share - stock 9.6% 9.7% 9.6% 9.4% 9.3% Abbey-branded retail savings net flows (£ bn) 0.3 0 0 -0.1 0.5Retail net deposit flows (£ bn) (3) 1.0 -0.1 0.1 0.1 0.8Investment and pension sales - API (£ m) 288 367 269 301 366 (excl. intermediary sales) Bank account openings (000s) 106 106 127 114 108Abbey branded current account liability (£ bn) 5.0 5.1 5.2 5.3 5.6Total gross UPL lending (£ m) 685 567 622 385 288 (3) Retail deposit net flows exclude certain liability flows that relate tocorporate banking balances. If these items had been included, total net depositsflows would have been Q1 2006: £1.3bn, Q2 2006: £0bn, Q3 2006: -£0.4bn, Q4 2006:£0bn, Q1 2007: £0.8bn Main highlights for the three months to 31 March 2007 (compared to the sameperiod in 2006 unless otherwise stated) include: • gross mortgage lending of £7.5 billion, 7% higher, with an estimated marketshare of 9.4%. Gross lending has been supported by a strong affordabilityproposition and national campaign in the first quarter, in addition to thelaunch of an enhanced Buy to Let proposition in the final quarter of 2006; • capital repayments of £6.2 billion were 11% ahead, in part due to a high levelof incentive period maturities coinciding with base rate rises. The estimatedshare of capital repayments were slightly ahead at 11.3%; • as a result, net mortgage lending of £1.4 billion was in-line with the prioryear, despite the impact of higher capital repayments; • net customer deposit flows of £0.8 billion. Excluding outflows from low /negative margin accounts, such as cahoot, performance was well ahead of prioryear. Abbey launched several new savings and investment products, including the8.1% Super ISA, Direct ISA and 50+ Saver. The launch of these products wassupported by national campaigns and contributed to the strong Abbey brandedinflows in the quarter. In particular, Abbey branded retail savings had inflowsup 60% compared to the same period last year; • investment and pension sales up 27%. Abbey consolidated improvements in salesproductivity made during 2006 and made further gains in investment salesproductivity up 35% on Q1 2006 and the number of authorised investment advisorsalso continues to increase. In total, funds under management are up 4% on thesame point last year; • bank account openings of over 108,000, were 2% higher than 2006 with Abbeybranded current account balances up 10%; and • total gross UPL lending decreased by approximately 60% reflecting ourincreased focus on profitable lending to existing customers through the branchnetwork. Abbey & Santander Abbey National plc ("Abbey") is a wholly owned subsidiary of Banco SantanderCentral Hispano, S.A. ("Santander") (SAN.MC, STD.N). Founded in 1857, Santanderhas more than 60 million customers, over 10,000 offices and a presence in over40 countries. It is the largest financial group in Spain and is a major playerin Latin America and elsewhere in Europe, including in the United Kingdom(through Abbey) and in Portugal. Through Santander Consumer it also operates aleading consumer finance franchise in Germany, Italy, Spain and ten otherEuropean countries. Santander has a secondary listing of its ordinary shares on the London StockExchange and Abbey continues to have its preference shares listed on the LondonStock Exchange. Nothing in this press release constitutes or should be construedas constituting a profit forecast. Disclaimer Abbey and Santander both caution that this press release may containforward-looking statements. The US Private Securities Litigation Reform Act of1995 contains a safe harbour for forward-looking statements on which we rely inmaking such statements in documents filed with the US Securities and ExchangeCommission. Such forward looking statements are found in various placesthroughout this press release. Words such as "believes", "anticipates","expects", "intends", "aims" and "plans" and similar expressions are intended toidentify forward looking statements, but they are not the exclusive means ofidentifying such statements. Forward-looking statements include, withoutlimitation, statements concerning our future business development and economicperformance. These forward looking statements are based on management's currentexpectations, estimates and projections and both Abbey and Santander cautionthat these statements are not guarantees of future performance. We also cautionreaders that a number of important factors could cause actual results to differmaterially from the plans, objectives, expectations, estimates and intentionsexpressed in such forward-looking statements. These factors include, but are notlimited to, (1) inflation, interest rate, exchange rate, market and monetaryfluctuations; (2) the effect of, and changes to, regulation and governmentpolicy; (3) the effects of competition in the geographic and business areas inwhich we conduct operations; (4) technological changes; and (5) our success atmanaging the risks of the foregoing. The foregoing list of important factors isnot exhaustive. When relying on forward-looking statements to make decisionswith respect to Abbey or Santander, investors and others should carefullyconsider the foregoing factors and other uncertainties and events. Suchforward-looking statements speak only as of the date on which they are made, andwe do not undertake any obligation to update or revise any of them, whether as aresult of new information, future events or otherwise. Statements as tohistorical performance, historical share price or financial accretion are notintended to mean that future performance, future share price or future earnings(including earnings per share) for any period will necessarily match or exceedthose of any prior year. This announcement is not a form of statutory accounts. Contacts Matthew Young (Communications Director) 020 7756 4232 Anthony Frost (Head of Media Relations) 020 7756 5536 Bruce Rush (Investor Relations) 020 7756 4275 Simon Donovan (Investor Relations) 020 7756 4476 For more information contact: ir@abbey.com This information is provided by RNS The company news service from the London Stock Exchange