High street bank Abbey says it has ridden out a dire economic climate with a 25 per cent increase in pre-tax profits in the first three months of 2009.
The Spanish-owned group said last year’s acquisitions – Alliance & Leicester and the savings arm of nationalised Bradford & Bingley – made a positive contribution to profits with a surplus of £372 million.
The deals gave Abbey 1,300 branches and 23,000 staff, making it the third biggest player in the UK savings market.
The first set of results for the combined business showed the pair added almost £50 billion to Abbey’s deposit base as of the end of March.
Official figures have shown the recession deepening in the first three months of 2009 but Abbey has benefited from a conservative lending strategy in the credit crunch, funding 75 per cent of loans with deposits. The firm, owned by Spain’s Santander, made £800 million in new mortgage loans in the first quarter – fully funded by deposits – in a market widely expected to be flat or even negative as borrowers clear existing debts.
Abbey said the majority of its existing mortgages were of high quality, with a loan-to-value ratio of only 52 per cent.
However, bad debt charges were £189 million – more than double a year earlier, but lower than the final quarter of 2008 – and loans more than three months in arrears crept up to 1.13 per cent of its mortgage book compared with 0.93 per cent at the year end. Chief executive Antonio Horta-Osorio was “prudently optimistic” for the rest of 2009, adding: “This is an excellent performance delivered in the toughest of economic environments.”
Abbey’s parent Santander also announced profits of £1.9 billion. In December, Santander said it would cut 1,900 UK jobs this year under plans to save £180 million by 2011.