A&L eases fears over bad debts

The trading update from A&L came after a fortnight in which a succession of major high street banks have said increasing numbers of customers were finding it harder to pay back loans.

In mortgages, A&L said the proportion of accounts in arrears had increased slightly from 0.68% at the end of 2004, but still remained below the 0.73% reported in December 2003. Within personal unsecured loans, the level of arrears was stable when compared to 4.2% in December.

The company said: “Although the first half of 2004 is likely to have been the best point in the current UK credit cycle, the group’s asset quality remains strong and above average in each business sector.”

A&L added that it had made “good progress” against its strategic objectives, even though revenues for the first half were expected to be broadly similar to a year earlier because of lower margins on loans and mortgages.

And with more than 50% of home loans being remortgages during the first three months of 2005, A&L said it had achieved fewer cross-sales in related products such as household insurance and life assurance.

Gross lending of £1.5bn (€2.3bn) in the first quarter of the year gave A&L a market share of 2.7%, down on the 3% seen at the year end.

The company added that loan advances were £890m (€1.4bn) in the three months of 2005, higher than a year earlier. Sales of new current accounts were also similar to the previous period.

A focus on cost management has also enabled the company to outperform its full year goal of total costs only increasing broadly in line with inflation.

Last year the company announced the closure of 46 branches as it looked to reflect the increasing popularity of internet and telephone banking.