Halifax earnings drop

July 31, 2001 Posted: 0904 GMT

LONDON (CNN) -- Halifax, the UK's largest mortgage lender, said net income fell 13 percent as it cut the cost of home loans to maintain market share.

The company, which is set to merge with Bank of Scotland in the next quarter, said first-half net profits fell to £547 million, or 24.4 pence per share, from £627 million, or 28.1p a share, in the same six months of 2000.

Halifax said pretax profits fell to £839 million in the six months, after a charge of £21 million for the merger, from £885 million last year, in line with expectations.

The mortgage lender and Bank of Scotland will become the UK's fifth-largest bank when the merger is complete. Europe has experienced a wave of consolidation in the financial sector as companies seek scale and an expanded range of services amid increasing competition.

The merger with Bank of Scotland (BSCT), approved by both sets of shareholders last week, will enable Halifax to diversify into small business and corporate banking, while Bank of Scotland will gain retail deposits and branches.

Halifax, meantime, has been cutting mortgage rates for existing borrowers in a pricing offensive to retain customers in the UK's cut-throat home loan market.

"Competition in the mortgage market remains intense and in this environment Halifax outperformed the market in sales, mortgage retention and net lending," the company said.

It said first-half sales rose 28 percent to £12.3 billion from £9.4 billion in the same six months of 2000, as the housing market showed no sign of slowing in the economic slowdown. The Halifax said it accounted for 17 percent of gross mortgage lending in the UK during the period.

Intelligent Finance, Halifax's Internet and telephone bank, said it had 140,000 accounts following delays in introducing the platform last year.

Despite that setback, Halifax reaffirmed its target of delivering profits on Intelligent Finance in the second half of 2003.

Halifax shares, (HFX) which have outperformed the UK bank sector by about 27 percent so far this year, rose 3.5 percent to 794.50 pence in London trading after the results were announced.

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