The HBOS banking group forecast
bad debts to get moderately worse as they revealed a 15 percent rise in their half-year profits to £2.26 billion.
HBOS was formed after a merger of the
Halifax and the
Bank of Scotland in 2001. The group said that the number of customers who had fallen behind on their
loans had risen to 2.22 percent from 2.03 percent last year. But because of historically low
interest rates and the fact that employment prospects remained strong, they said "We therefore expect only a brief period of slower economic growth and a moderate deterioration in retail
credit conditions."
The group also said that its share of the
mortgage market was unchanged on last years figure of 17 percent. "Overall, the economic outlook in the UK remains encouraging," the group added.
This follows news from
HSBC and
Lloyds TSB, who have felt the impact of slower consumer spending on repayments.
Barclays and
Royal Bank of Scotland are due to release their reports.
HBOS said it lost £753m covering the debt problem in the first six months to June 30, compared with £602m last year.
In the high street division of HBOS, customers opened 311,000 new
bank accounts and 429,000
credit card accounts. This resulted in underlying profits to rise by 8 percent to £1bn.
HBOS now has a 17% share of the UK's net mortgage lending. Their strategy of high returns and, specialised
lending over
re-mortgages resulted in a rise in bad secured debt to 1.84% from 1.43% at the end of 2004.
The group said it was continuing its focus on strong asset cover for its loans. The loan to value ratio (LTV) of new lending stayed at 59%. Across the board, 11% of
secured loans have an LTV above 85%, compared with 7% at the end of 2004.
On the retail side, HBOS said claims for
endowment compensation continued to run at high levels for the first six months of the year but the volume of claims has now peaked. It has put an additional £130m aside to settle customer claims.
Profits in the corporate division rose by 29% to £757m, with customer deposits growing at a rate of 16%. There was an improvement in credit quality during the period.
