Sant Uk.10te% Regulatory News (SAN)

27 Sep 2006 07:30

Abbey National PLC27 September 2006 Abbey National plc - Unaudited Interim Announcement Six Months Ended 30 June 2006 On 27 July 2006, Abbey National plc ("Abbey") issued a Trading Statementsummarising the results for the six months ended 30 June 2006. That statementwas unaudited and did not comprise an interim results announcement. It containednarrative on business trends and new business. This statement is a follow-up tothe Trading Statement and comprises Abbey's interim results announcement. Itcontains unaudited primary financial statements, including an income statement,balance sheet, statement of recognised income and expense, and cash flowstatement. For further details of business trends it should be read inconjunction with the Trading Statement issued on 27 July 2006. Whilst thefinancial information included in this interim announcement has been calculatedin accordance with International Financial Reporting Standards (IFRS), thisannouncement does not contain all the financial statement disclosures that wouldbe required under IFRS. The accounting policies adopted by Abbey in the periodcovered by this announcement are consistent with those described in the AnnualReport and Accounts 2005 except for a change in accounting policy resulting fromthe adoption of 'Amendments to IAS 39 and IFRS 4 - Financial GuaranteeContracts'1. Summarised Consolidated Income Statement Continuing operations 30 June 30 June 2006 2005 £m £mNet interest income 584 547Non-interest income 611 596Total operating income 1,195 1,143Administrative expenses (708) (767)Depreciation and amortisation (109) (95)Impairment losses on loans and advances (127) (110)Provisions for other liabilities and charges - 2Share of profit/(loss) of associates (1) 5Profit on ordinary activities before tax 250 178Tax on profit on ordinary activities (60) (61)Profit on ordinary activities after tax from continuing operations 190 117Discontinued operationsProfit for the period from discontinued operations 53 90Impairment losses from discontinued operations (232) -Profit/(loss) for the period from discontinued operations (179) 90Profit for the period 11 207 2006 compared to 2005 Profit before tax from continuing operations of £250m compared to a profit of£178m in 2005 and marks a significant improvement on 2005. Material movements byline include: • net interest income of £584m (2005: £547m) increased due to the continued benefit from broadly stable margins and accelerating asset growth in the retail business; • non-interest income of £611m (2005: £596m), benefited from increased business volumes and fee changes in the Retail Bank. Abbey Financial Markets made a strong contribution, with a good underlying business performance benefiting from increased market volatility in the first half of 2006. These positive trends were partly offset by a decrease in other operating income which relates to the non-recurrence of the gains on sale of PBU2 assets in the first half of 2005 and adverse mark-to-market impacts; • administrative expenses of £708m (2005: £767m) reduced by 8%. The on-going reduction in expenses continues the excellent progress made towards achieving the cost saving target of £300m by the end of 2007. Headcount levels at 30 June 2006 were c.1,300 full time equivalents (FTE) lower than at 31 December 2005; • depreciation and amortisation of £109m (2005: £ 95m) includes depreciation charge on operating lease assets of £62m which is consistent with last year (2005: £61m). The remaining movement in depreciation and amortisation relates to additional charges due to asset write offs; • provision charge in relation to bad and doubtful debts of £127m (2005: £110m). The increase is due to higher retail lending provision charges driven by the unsecured personal lending book as expected. Mortgage related provisions have also increased from a low 2005 base, albeit mortgage credit quality remains very strong and remains better than the industry average; • Discontinued operations represent the Life insurance businesses. Abbey announced on 7 June 2006 that it had entered into an agreement to sell its entire Life insurance business to Resolution plc for cash consideration of approximately £3.6bn. All required conditions were met prior to cash consideration passing on 1 September. The sale allows Abbey to concentrate on the development of its retail banking business. The results of the Life insurance businesses reduced in part due to higher lapse rates. The impairment losses reflect adjustments to the values of certain assets as a result of the classification of the Life insurance businesses as held for sale. The final loss on the sale of the Life insurance businesses will be included in the financial statements for the year ended 31 December 2006. As at 30 June 2006, 31 December 2005 and 30 June 2005 As at As at As at 30 June 2006 31 December 30 June £m 2005 2005 £m £mAssetsCash and balances at central banks 3,114 991 312Trading assets 64,995 58,231 46,100Derivative financial instruments 7,761 11,855 13,395Financial assets designated at fair value 4,158 30,597 25,957Loans and advances to banks 33 444 808Loans and advances to customers 99,581 95,467 94,318Available for sale securities 7 13 49Investment in associated undertakings 30 24 23Intangible assets 98 171 173Value of in force business - 1,721 1,713Property, plant and equipment 344 314 233Operating lease assets 2,133 2,172 2,150Investment property - - 1,134Current tax assets 472 235 209Deferred tax assets 771 796 803Other assets 1,763 4,003 3,653 Assets classified as held for sale 28,920 - -Total assets 214,180 207,034 191,030 Deposits by banks 1,132 5,617 555Customer accounts 66,526 65,889 65,146Derivative financial instruments 8,435 11,264 12,856Trading liabilities 66,671 52,664 40,765Financial liabilities designated at fair value 8,905 7,948 8,372Debt securities in issue 21,773 21,276 21,496Other borrowed funds 1,920 2,244 1,408Subordinated liabilities 6,033 6,205 6,778Insurance and reinsurance liabilities - 21,501 21,583Macro hedge of interest rate risk 52 13 -Other liabilities 2,021 3,190 3,098Investment contract liabilities - 3,306 3,120Other provisions 147 253 222Current tax liabilities 414 288 283Deferred tax liabilities 629 886 1,103Retirement benefit obligations 1,107 1,380 1,349Liabilities classified as held for sale 25,340 - -Total liabilities 211,105 203,924 188,134 Share capital 148 148 148Share premium account 1,857 1,857 1,857Retained earnings 1,070 1,105 891Total shareholders equity 3,075 3,110 2,896Total liabilities and equity 214,180 207,034 191,030 For the six months ended 30 June 2006 2006 £m Exchange differences on translation of foreign operations (5)Actuarial gains and losses on defined benefit pension plans 238Dividends (207)Tax on items taken directly to equity (72)Net (loss) recognised directly in equity (46)Profit/(loss) for the period 11Total recognised income and expense for the period (35) Attributable to:Equity holders of the parent (35)Minority interest - (35) Consolidated Cash Flow Statement For the six months ended 30 June 2006 and 2005 2006 2005 £m £m Net cash flow (used in) / from operating activities (2,317) 414 Cash flows from / (used in) investing activitiesDividends received from associates 2 3Investment in associates (7) -Disposal of subsidiaries, net of cash disposed - 319Purchase of tangible and intangible fixed assets (104) (394)Proceeds from tangible and intangible fixed assets - 538Purchase of non-dealing securities (3) (164)Proceeds from sale and redemption of non-dealing securities - 250Net cash flow (used in) / from investing activities (112) 552 Cash flows from / (used in) financing activitiesIssue of loan capital 300 537Repayment of loan capital - (69)Net cash flows from financing activities 300 468 Net (decrease) / increase in cash and cash equivalents (2,129) 1,434 Cash and cash equivalents at beginning of the period 8,241 11,259Effects of exchange rate changes on cash and cash equivalents (572) 96Cash and cash equivalents at the end of the period 5,540 12,789 Notes: 1. The accounting policies adopted by Abbey in the period covered by this announcement are consistent with those described in the Abbey National plc Annual Report and Accounts 2005 except for a change in accounting policy resulting from the adoption of 'Amendments to IAS 39 and IFRS 4 - Financial Guarantee Contracts', which was adopted by Abbey on 1 January 2006. Abbey has retrospectively adopted the amendment in accordance with IAS 8 ' Accounting Policies, Changes in Accounting Estimates and Errors'. Retrospective adoption of the amendment had no material impact on Abbey's results or financial position. In accordance with the amendment, Abbey accounts for certain types of financial guarantee contracts it issues as financial liabilities. Financial guarantee contracts are initially recognised at fair value and subsequently measured at the higher of the initial fair value less cumulative amortisation of fee income, and the amount that would be recognised as a provision in the event Abbey has to reimburse the holder for any loss incurred. 2. PBU refers to the "Portfolio Business Unit" that was set up to manage businesses for exit as part of Abbey's strategy to focus on core operations. These businesses have now largely been exited and the remaining assets have been incorporated into Abbey Financial Markets. Abbey and the flame logo are registered trademarks. Abbey and Santander Abbey is a wholly owned subsidiary of Banco Santander Central Hispano, S.A.("Santander") (SAN.MC, STD.N). Founded in 1857, Santander had, at 6 June 2006,Euro 818,100 million in assets and Euro 976,500 million in managed funds, 67million customers, 10,300 offices and a presence in 40 countries. It is thelargest financial group in Spain and Latin America, the sixth largest bank byassets in the United Kingdom (through Abbey) and the third in Portugal. ThroughSantander Consumer Finance, it also operates a leading consumer financefranchise in Germany, Italy, Spain and nine other European countries. Santanderrecorded Euro 3,216 million in net attributable profit in the first half of2006, 26% more than in the same period of the previous year. Disclaimer: 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. 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. Please refer to the AbbeyAnnual Report on Form 20-F annually filed with the US Securities and ExchangeCommission for a discussion of such factors. This announcement is not a set of statutory accounts. This announcement wasapproved by the board on 26 September 2006. Contacts Peter Sutton (Investor Relations) 020 7756 4265 Bruce Rush (Investor Relations) 020 7756 4275 Matt Young (Media Relations) 020 7756 4232 For more information contact: investor@abbey.com. This information is provided by RNS The company news service from the London Stock Exchange