HBOS profits climb to record despite bad debt fears
Halifax Bank of Scotland (HBOS), a big provider of UK current accounts and the largest savings products company in the country, has announced record pre-tax profits of £5.7bn, up 19% on £481bn a year earlier.
The performance included a 4% rise in the company’s retail banking arm to £2.29bn. HBOS said that overall the rise in profitability was due to stricter cost controls being introduced and strong earnings from corporate banking and insurance sales.
The bank also expressed optimism about the UK economy and growth in its main markets, such as the provision of UK current accounts and mortgages, where it has 21% of the total market. It characterised the current national business environment as “generally benign”.
However, HBOS did express concern at the level of unsecured debt in the country and the effect this has on UK lenders, saying that the uncertainty caused by the growing number of personal insolvencies made it “cautious about future trends”.
HBOS booked £1.74bn of bad debt in 2006, up from £1.6bn in 2005, and representing 0.48% of average customer advances.
While the growth in bad debts in unsecured lending abated in the second half of the year, the figure was up in absolute terms and as a percentage of advances increased to 13.2% from 11.5% a year before.