Results at British bank HBOS met expectations but bad loans in retail banking increased, the company said today.
Pre tax profit for 2004 rose 22 per cent to £4.592 billion (€6.9 billion), Britain's biggest mortgage lender said.
Non-performing loans as a share of customer advances rose to 2.16 per cent in retail banking from 1.81 per cent a year earlier, the bank said.
Credit quality in corporate banking improved, it added, saying the overall outlook for asset quality would be little changed this year.
At 8am, HBOS shares were 1.1 per cent lower at 838p in a broader market down 0.2 per cent. The shares have outperformed the FTSE banks index by 5 per cent since December 14th when it announced a share buyback of up to £750 million for this year and said 2004 profit would beat forecasts.
HBOS is the latest UK bank to report results for 2004, a year of revenue growth and low bad debts that have boosted profits. Investors are concerned that as interest rates rise, income growth will slow and bad debts will increase. With its share buyback programme, HBOS is shifting its strategy from rapid growth of assets to returning cash to shareholders.
The bank has had three years of massive expansion since it was formed from the merger of Halifax and Bank of Scotland in 2001. The bank has won round some sceptics who had doubted its strategy of price-led expansion, and investors have welcomed chief executive Mr James Crosby's willingness to reject acquisitions, including former archrival Abbey National.