Sant Uk.10te% Regulatory News (SAN)

10 May 2005 07:30

Abbey National PLC10 May 2005 2005 Quarter 1 Trading Statement London, 10 May 2005 This statement provides a summary of the business and financial trends for thethree months to 31 March 2005. Unless otherwise stated, the trends refer to theentire Abbey National plc ("Abbey") group (including both Personal FinancialServices and Portfolio Business Unit operations) relative to the same period in2004 on a like for like accounting basis. The results reflect the impact of implementing IFRS that has resulted in anabsolute reduction in Abbey's financial results, though not significantlyimpacted the ongoing trends in the business when certain 'one-off' impacts areadjusted for. As a result, financial trends are not materially different whencompared to trends on a UK GAAP basis. The first quarter results of Grupo Santander are also released today, andAbbey's first quarter performance is included within their financial statements. Comment "Abbey has made a positive start to 2005 - revenues are stabilising and we'reahead of plan in tackling costs, but we still have a long way to go. It is too early for the changes we are making to have had a meaningful impact onsales performance, but the first quarter results nonetheless include someencouraging early signs. Mortgage approvals are improving, with our overallshare of approvals better than at any point in the last 15 months. Theturnaround in savings inflows, credit card openings and unsecured personal loansales is also continuing. In the first quarter, recurring trading costs were £20 million lower than thesame period last year, and significantly lower than the fourth quarter run-rate.We have made swift progress on our headcount reductions - and are now confidentthat 4,000 roles can be removed this year, an increase from the previous targetof 3,000. We have already removed 2,400 roles from the business, of whichapproximately 1,000 people have already gone. In February, Graeme Hardie joined the Board as Sales & Marketing Director, andmore recently we completed the senior management team with the appointment ofPaul Bradshaw as Chief Executive, Insurance and Asset Management. Thisappointment confirms the importance of this business and the intermediarychannel to Abbey's plans. We are moving quickly to ensure that we improve sales and revenue performance aswe progress through 2005, and beat our target of reducing costs from recurringoperations by £150 million." Francisco Gomez-Roldan Results Abbey's profit before tax was ahead of the first quarter of 2004. Total income: Net interest income was significantly lower than the comparative period. Thiswas largely due to the impact of the reduction in the average Banking andSavings spread through the course of 2004. There has only been a slight furtherdecline in the spread in the first quarter of 2005, in part due to reduced earlyredemption charges consistent with the current interest rate environment. In addition, net interest income has been impacted by lower earnings on theGroup's free reserves (partly due to the payment of the special dividend inDecember 2004), and also lower asset balances in Abbey Financial Markets. Non-interest income for the first quarter of 2005 was up on the first quarter of2004, primarily due to higher bank account fee income, and profit share receiptsin general insurance from our underwriters. In total, operating income is broadly consistent with the underlying second half2004 run-rate. Total expenses: In the first quarter of 2005, operating expenses excluding re-organisation costswere 10% lower than the same period in 2004, with approximately half relating tobusiness disposals and wind-downs. The remainder of the cost reduction is spreadacross the business areas, reflecting the early stages of cost reductionactivity and representing good progress towards the goal of reducing costs fromrecurring operations by £150 million in 2005. Re-organisation costs were alsolower, and we remain comfortable with an estimated full year cost of around £150million before regulatory change investment. In total, 2,400 roles have been removed from the business, of whichapproximately 1,000 have already left the company. The work to evaluate potential cost savings is now well progressed, and hasresulted in an increased expected headcount reduction, of 4,000 in total, in2005, without compromising risk and compliance capability. Total provisions: In Abbey's core mortgage lending operations, provisions for loan losses remainat historically low levels, reflecting strong credit quality despite a modestincrease in three month plus arrears and properties in possession. The recent growth and ageing of the unsecured lending book has resulted in anincrease in provisioning levels, with this more than offset by thenon-repetition of provisions in relation to the wind-down of certain wholesalebanking portfolios. New business flows: Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 2004 2004 2004 2004 2005Gross mortgage lending (£ bn) 6.7 6.3 6.4 5.6 5.0Capital repayments (£ bn) 4.6 5.2 6.0 6.1 5.6Net mortgage lending (£ bn) 2.1 1.1 0.4 (0.5) (0.6)Stock (£ bn) 90.0 91.0 91.4 90.9 90.3Market share - gross lending 10.1% 8.2% 8.0% 8.4% 8.8%Market share - net lending 9.2% 3.8% 1.3% (2.3)% (3.5%)Market share - stock 11.3% 11.0% 10.7% 10.4% 10.1%Total net deposit flows (£ bn) (1.2) 0.2 1.2 1.2 0.4Bank account openings 99,000 92,000 104,000 95,000 98,000Gross UPL lending (£ m) 676 430 456 536 504Credit card openings 40,000 49,000 60,000 49,000 58,000Investment sales - APE (£ m) 26 32 28 33 26Protection sales - APE (£ m) 31 25 22 19 19General Insurance sales 101,000 95,000 98,000 82,000 77,000 Main highlights include: • gross mortgage lending of £5.0 billion, representing an improved market share estimated at 8.8% given a smaller overall market in the period. Capital repayments of £5.6 billion were above natural share, largely driven by maturities of two-year incentive lending written in 2002 and early 2003. This, combined with lower approvals performance in the final quarter of 2004, contributed to the negative net lending in the first quarter of 2005. However, sales through all channels are improving, with a marked increase in approvals in March; • deposit inflows of £0.4 billion for the first quarter of 2005, with new branch based acquisition account inflows again offsetting back-book attrition; • total bank account openings were consistent with last year's performance, but were stronger through the Abbey brand, whilst credit card openings (up 45% on Q1 2004) and gross unsecured lending (Abbey branded up 40% on Q1 2004) sustained the trends in the latter part of 2004; • investment sales are consistent with the same period last year; and • protection and general insurance sales continue to be impacted by lower mortgage lending, but are expected to improve from the second quarter. Disclaimer Grupo Santander (SAN.MC, STD.N) is the largest bank in the Euro Zone and theninth largest worldwide by market capitalisation. Founded in 1857 in thenorthern Spanish port of Santander, the Group today has 63 million customers,10,000 offices and operations in more than 40 countries. It is the largestbanking group in Spain and Latin America by business volumes. In 2004, Santandergained a prominent position in the United Kingdom through the acquisition ofAbbey, the country's second largest mortgage provider. In Portugal, Santander isthe second largest bank by profits. The Santander Consumer unit is a leadingconsumer finance franchise in Germany, Italy, Spain, Portugal, Poland andseveral other European countries. Banco Santander Central Hispano, S.A. is currently in the process of obtaining asecondary listing on the London Stock Exchange. Pursuant to the rules of the UKListing Authority, where a profit forecast or estimate is made, the principalassumptions upon which the issuer has based its forecast or estimate must bestated, and such forecast or estimate must be examined and reported on by theissuer's auditors and by the listing sponsor. In practice, such a process wouldmaterially affect the time schedule of the listing and, accordingly, precludesus from publishing any profit forecast or estimate. As such, nothing in thispress release constitutes or should be construed as constituting a profitforecast. This document does contain certain "forward-looking statements" with respect tocertain plans of Abbey National plc ("Abbey") and its current goals, plans,expectations and assumptions relating to its future financial condition,performance and results. By their nature, all forward-looking statements involverisk and uncertainty because they relate to future events and circumstances,which are beyond Abbey's control. These include, among other things, UK domesticand global economic and business conditions, market-related risks such asfluctuations in interest rates and exchange rates, the policies and actions ofregulatory authorities, the impact of competition, inflation / deflation, thetiming, impact and other uncertainties of future acquisitions or combinationswithin relevant industries, as well as the impact of tax and other legislationand other regulations in the jurisdictions in which Abbey and its affiliatesoperate. As a result, Abbey's actual future financial condition, performance andresults may differ materially from the plans, goals, and expectations set forthin Abbey's forward-looking statements. Contacts Thomas Coops (Communications Director) 020 7756 5536 Jon Burgess (Head of Investor Relations) 020 7756 4182 Christina Mills (Head of Media Relations) 020 7756 4212 For more information contact: investor@abbey.com. This information is provided by RNS The company news service from the London Stock Exchange