Sant Uk.10te% Regulatory News (SAN)

28 Apr 2006 07:30

Abbey National PLC28 April 2006 Abbey makes positive start to 2006 London, 28 April 2006 This statement provides a summary of the business and financial trends for thethree months to 31 March 2006. The results for quarter one 2006, includingongoing Portfolio Business Unit (PBU) operations, are compared to equivalentresults for the same period in 2005 (excluding certain PBU operations that nolonger exist). The first quarter results of Santander on a Spanish IFRS basis are also releasedtoday and can be found on http://www.gruposantander.com/. Abbey's first quarterperformance is included within their financial statements. Highlights First quarter highlights include: • statutory profit before tax higher than the first quarter 2005 due to a substantial increase in trading profits partly offset by higher reorganisation expenses, reflecting early stages of reorganisation activity in the first quarter of 2005; • trading profit before tax benefiting from good growth in revenues and lower trading expenses, partially offset by an increase in provision charges. Relative to the fourth quarter 2005, the trading profit before tax is broadly in-line; • trading income well ahead of the first quarter 2005 primarily due to improved fee income, but also resulting from a modest increase in net interest income. Retail lending balances are 6% higher than the same point last year and are now in excess of £100 billion for the first time, with the retail banking spread remaining reasonably stable; • improved new business flows across most retail products; • trading expenses lower than the first quarter 2005 due to on-going cost reduction activity. Headcount is lower by over 4,500 full time equivalent (FTE) compared to December 2004, including a reduction in headcount of around 600 FTE since December 2005; • a reduction in the trading cost: income ratio from 67.7% in the first quarter of 2005 to 57.7% (2005 full year: 60.4%); and • retail lending provision charges higher than the same period last year, and higher than the fourth quarter, reflecting the seasoning of the book, combined with market wide trends in unsecured lending credit quality. Comment "We've made an excellent start to the year and we continue to make progressagainst our stated targets. The positive trends we reported through 2005 havebeen maintained in the first quarter of 2006. Revenue growth is being sustained with overall new business flows well ahead ofthe same period last year, driven by increased sales capacity but alsoimprovements in sales productivity per adviser and cross-sales performance.We're introducing better analysis and information on product profitability,sales capacity and productivity by channel, region and branch. This approach isenabling us to focus our efforts on reducing under-performance, targetingincentives and managing performance across the business more rigorously. In the first quarter, we have launched a premium banking service and our plansto launch a new credit card operation are on track. We have also hit our first milestone in the rollout of Partenon, Santander'sbanking platform, with the successful launch of a new intranet and internetacross the business. This is the first visible sign of Partenon and there are anumber of further developments coming later this year, including theintroduction of a single customer database. The rollout of Partenon is beingphased through 2006 and 2007. This has been a very positive start to 2006 for Abbey. However, we're notcomplacent. We still have many challenges to meet for the remainder of the yearand within our 3-year plan." Francisco Gomez-Roldan, CEO Results Abbey statutory profit before tax and net attributable profit ahead of the sameperiod in 2005. Trading income: Net interest income up slightly on the first quarter 2005, reflecting modestgrowth in retail lending with overall spreads remaining broadly stable. Most ofthe increase is driven by growth in mortgages and unsecured loan balances offsetby a reduced contribution from savings. After adjusting for the reduced number of days in the quarter, retail bankingnet interest income relative to the fourth quarter was broadly stable. However,overall net interest income was adversely impacted by the run off of theremaining PBU assets. Non-interest income was significantly higher reflecting growth in underlyingbusiness volumes combined with pricing changes put in place in 2005 in relationto both mortgages and banking. Insurance related income was broadly flat, whilst Abbey Financial Marketscontributed a strong performance largely due to money markets and structuredproducts business. Overall, trading income improved in-line with expectations. Expenses: Operating expenses were lower than the first quarter of 2005. A decrease inemployment related costs reflected the reduction in headcount of over 4,500 FTEsince December 2004, and around 600 FTE so far in 2006, partially offset bysalary inflation. In addition, action has already been taken to reduce headcountby a further 400. Other expense reductions resulted from lower manufacturingcosts and central expenses including procurement, legal and finance, offset byinvestment in new operations. Operating expenses were lower than the final quarter of 2005 reflecting furtherheadcount savings combined with the non-recurrence of year-end accruals andemployee profit share payments. Provisions: Provisions were significantly higher than the same period last year, with theunderlying increase in retail banking provisions largely due to the seasoning ofthe unsecured personal loan portfolio and some deterioration in quality in linewith industry experience. Secured lending credit quality remains very strong. Properties in possessionhave increased since December 2005, although 3 month plus arrears now represent0.63% of the book down from 0.65% at December and still well below the industryaverage. The average loan to value (LTV) on new business and stock remainedin-line with 2005. Non-trading charges: Re-organisation expenses and other charges were lower than the fourth quarter in2005 primarily due to the non-recurrence of compensation costs associated withendowment policy remediation. There has been no quantification of the impact ofinvestment variances (non-trading) or experience variances and assumptionchanges (trading) included in the first quarter result. Business flows Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 2005 2005 2005 2005 2006 Gross mortgage lending (£ bn) 4.9 6.6 8.1 8.0 7.0Capital repayments (£ bn) 5.5 5.9 6.5 6.7 5.6Net mortgage lending (£ bn) (0.6) 0.7 1.5 1.4 1.4Stock (£ bn) 90.3 91.0 92.5 93.9 95.2 Market share - gross lending 8.7% 9.5% 10.1% 9.8% 9.5%Market share - capital repayments 14.1% 12.9% 12.0% 11.6% 10.7%Market share - net lending (3.6)% 3.0% 6.0% 5.5% 6.3%Market share - stock 10.1% 9.9% 9.8% 9.7% 9.6% Total net deposit flows (£ bn) 0.3 1.0 0.8 0.6 1.3 Bank account openings (000s) 96 96 101 93 106Gross UPL lending (£ m) 504 467 614 531 685Credit card openings (000s) 62 66 56 33 31 Investment sales - APE (£ m) 26 50 40 43 32Protection sales - APE (£ m) 19 21 22 20 19 Main highlights include: • gross mortgage lending 43% higher, with applications in quarter one 2006 up 41% on the same point last year, reaching record levels, with an estimated market share of 10.6%. This improvement is in part due to lending into flexible products, increasing over 150% on the same point last year, with balances up £3.3 billion or 50%; • capital repayments broadly flat at £5.6 billion. The estimated market share of repayments fell to 10.7%, a significant improvement on the prior year of 14.1% and more consistent with Abbey's natural share; • estimated net lending share of 6.3%, better than any quarter last year; • deposit inflows of over £1.3 billion compared to £0.3 billion in quarter one 2005, with lower than expected outflows from back book accounts combined with a strong contribution from new branch based accounts, Abbey current account and cahoot; • bank account openings were 10% higher than the same period last year. Adult account openings increased, and switcher account openings were up over 250%, reflecting successful acquisition from our competitors through the 6% Bank and Save campaign; • gross unsecured lending over 30% higher, with lending through branches up over 40%, combined with a significant increase in cahoot; • investment sales (excluding Inscape) increased 23% on last year due largely to increased sales of the offshore bond and the Guaranteed Income Bond. Including sales of Inscape, direct channel sales were up over 70% on the same period last year; and • protection sales broadly in line with the same period last year, with branch and telephone sales offsetting a modest decline in the intermediary channel. Disclaimer Abbey National plc ("Abbey") is a wholly owned subsidiary of Banco SantanderCentral Hispano, S.A. ("Santander") (SAN.MC, STD.N). Santander is one of largestbanks in the world by market capitalisation. Founded in 1857, Santander has 66million customers, over 10,000 offices and a presence in over 40 countries. Itis the largest financial group in Spain and Latin America, and is a major playerelsewhere in Europe, including in the United Kingdom (through Abbey) and inPortugal, where it is the 3rd largest banking group. Through Santander Consumerit also operates a leading consumer finance franchise in Germany, Italy, Spainand nine other European countries. Santander obtained a secondary listing of its ordinary shares on the LondonStock Exchange in 2005 and Abbey continues to have its preference shares listedon the London Stock Exchange. Nothing in this press release constitutes orshould be construed as constituting a profit forecast. 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. Note: Statements as to historical performance, historical share price orfinancial accretion are not intended to mean that future performance, futureshare price or future earnings (including earnings per share) for any periodwill necessarily match or exceed those of any prior year. Contacts Matthew Young (Communications Director) 020 7756 4232 Israel Santos (Investor Relations) 020 7756 4181 Bruce Rush (Investor Relations) 020 7756 4275 For more information contact: ir@abbey.com. This information is provided by RNS The company news service from the London Stock Exchange