Alliance & Leicester stole a march on its high street banking rivals yesterday after claiming a greater share of new business.
The group said revenues from its four key product areas in retail banking, including mortgages and current accounts, rose by more than five per cent during a year when operating profits improved to £548 million from £540 million.
Net mortgage lending hit a record high of £4.9 billion to give the group a market share of 5.4 per cent, while 254,000 new current accounts were opened to boost its customer base to 1.52 million.
A&L chief executive Richard Pym said the results were achieved in spite of slower growth in its markets.
"Alliance & Leicester delivered a good performance in 2005. We hit our strategic objectives, delivered good financial results and put in place a number of actions which emphasise growth and development going forward," he added.
However, A&L reported a mixed picture on credit quality with the proportion of households falling behind on their mortgage repayments dropping to 0.64 per cent and below the industry average at a time when arrears on unsecured loans rose by nearly a percentage point to 5.1 per cent.
A&L said its costs fell by £21 million during 2005 and it was helped by more customers banking by telephone or online, giving it a market share in this fast-growing segment of 20 per cent.
Costs as a ratio to income improved to 55 per cent last year from 57 per cent in 2004, and the bank said it would implement more initiatives to drive that level below 50 per cent by 2010.
Last month, the company announced plans to remove 350 posts during a shake-up of its back-office operation at Bootle on Merseyside.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said savings made during the past year had pushed the results marginally ahead of expectations.
But he added: "Whilst the cost-cutting measures have been well received, revenues growth is virtually nowhere to be seen, and A&L has not been immune from the emerging theme of a rise in unsecured bad debts."
Keefe, Bruyette & Woods also said in a research note that cost control was excellent, but the results confirmed "the anaemic revenue performance" at the bank.
A&L said its total income was £1.39 billion in 2005, putting it on par with the £1.37 billion that it turned over 12 months earlier.
But revenues growth was expected to accelerate at a faster rate in 2006 than in previous years and that should exceed any increase in its cost base, the bank said.
"We anticipate that growth from existing business lines and the planned new developments will generate feebased revenue streams," A&L added.
The company said it will issue up to £300 million of non-equity tier one capital in 2006, in the form of preference shares, and also said it plans to launch a share buyback programme. The total dividend for 2005 rises by seven per cent to 51.5 pence.