Halifax has bounced back from seven years of decline to take a quarter of the home loans market with its strategy of sacrificing profit margin for volume. The bank, the largest mortgage lender, achieved its record share of net lending - new loans minus redemptions - by cutting margins in the first six months of the year, which helped push down pre-tax profits 5 per cent to £839m. James Crosby, chief executive, said the approach of offering better value products to customers was working. "We have taken the mortgage market apart," he said. "The results of our strategy are plain to see; we have simply smashed all our sales targets."
He said the growth in mortgage volumes - mainly due to aggressive attempts to retain customers - would contribute to profits in future, as would increases in sales of current and savings accounts and credit cards. Halifax shares rose 45{1/2}p or 6 per cent to 813p, helped by a trading statement from Bank of Scotland, with which it will merge in September to form HBOS. BoS said its margins and credit quality were stable, helping push up the sector as it calmed fears of rising bad debts.
Mr Crosby said Halifax was likely to exceed its goal of 15 per cent of net home loans for the next six months, but he did not raise the long-term target. But the cost of the new strategy showed in the results. The retail bank, which contributes most of the profits, saw pre-tax profits fall by £100m to £569m. The interest spread - the gap between savings and loan rates - fell to 1.7 percentage points from 2 points last year but will remain stable for the rest of the year, the bank said.
The life assurance business turned in a strong performance. The division's profits increased to £241m (£136m) on the back of a big jump in sales at Clerical Medical and a full six months of contributions from St James's Place, bought in June 2000. Operating costs, which the bank has pledged to keep flat for the full year, fell 6 per cent to £625m before £55m of internet spending and £61m of acquisitions and goodwill amortisation. No dividend will be paid but Mr Crosby said that HBOS will pay an interim dividend of 9.3p after the merger.
He said the growth in mortgage volumes - mainly due to aggressive attempts to retain customers - would contribute to profits in future, as would increases in sales of current and savings accounts and credit cards. Halifax shares rose 45{1/2}p or 6 per cent to 813p, helped by a trading statement from Bank of Scotland, with which it will merge in September to form HBOS. BoS said its margins and credit quality were stable, helping push up the sector as it calmed fears of rising bad debts.
Mr Crosby said Halifax was likely to exceed its goal of 15 per cent of net home loans for the next six months, but he did not raise the long-term target. But the cost of the new strategy showed in the results. The retail bank, which contributes most of the profits, saw pre-tax profits fall by £100m to £569m. The interest spread - the gap between savings and loan rates - fell to 1.7 percentage points from 2 points last year but will remain stable for the rest of the year, the bank said.
The life assurance business turned in a strong performance. The division's profits increased to £241m (£136m) on the back of a big jump in sales at Clerical Medical and a full six months of contributions from St James's Place, bought in June 2000. Operating costs, which the bank has pledged to keep flat for the full year, fell 6 per cent to £625m before £55m of internet spending and £61m of acquisitions and goodwill amortisation. No dividend will be paid but Mr Crosby said that HBOS will pay an interim dividend of 9.3p after the merger.
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