Huge jump in Abbey profits

Published: February 05, 2009

In a change from the ongoing dismal economic news, Abbey have announced a significant jump in pre-tax profits. The figure of £991 million represents an increase of over 20% on the previous year, and sends a message to all mortgage lenders that it is still possible to offer attractive rates and remain profitable despite the current downturn.

For some time, Abbey have been part of the Spanish banking group Santander, who have recently acquired both Alliance & Leicester and the savings arm of the Bradford & Bingley. Santander as a whole reported a two per cent fall in profits to 8.88 billion euros, but this was after a 3.57 billion euro write-down to cover bad debts. In the UK, Abbey said the number of homes they are repossessing has shown a marked increase, bought about by an increasing number of mortgage holders who are struggling to meet payments as a result of the current economic turmoil. However, whilst the Abbey says that it has 10,897 customers who are currently in arrears, the 62% increase in repossession still meant that less than 1,000 customers actually lost their homes.

In recent months Abbey have been actively competing for new mortgage business, and it is rumoured that they now account for one in four of every new mortgage taken out in the UK. In terms of the rates on offer, they are frequently the lowest, and this would indicate that Antonio Horta-Osorio, chief executive of Abbey is right when he states that they are cautiously optimistic about their prospects this year. However, both the mortgage and wider housing industries are desperate for a lender to start making loans available to first time buyers at sensible rates, and without them needing a king's ransom as a deposit. It remains to be seen whether Santander will lead or follow in this respect, but many of us hope for the former.