The increase in the cost of borrowing funds for mortgages on the wholesale market contributed to a fall in the profits of its retail business by 13%, prompting a HBOS spokesperson to forecast an ‘uncertain’ year for the banking group in 2008.
Mortgage sales were described as ‘disappointing’ for the bank in the early sector of 2007, but they improved in the second half of the year.
A more cautious approach to lending led to a fall in the amount of unsecured loans administered by the banks in 2007. Customers' outstanding balances on credit cards also fell 3%, higher than the market average.
HBOS chief executive Andy Hornby targets strong growth in savers markets during 2008:
‘We are well placed to take opportunities presented by these difficult markets and deliver good growth in shareholder value over the next few years. We have increased our shareholder dividend by 18% to 48.9p.’
Throughout 2007, HBOS repaid £122 million to customers who had complained of being overcharged for running up unauthorised overdrafts. The refund is the largest revealed so far for last year, topping the £116m paid by Barclays(www.barclays.co.uk) and the £76m refunded by Lloyds(www.lloydstsb.com).
In the light of the ongoing OFT high court action against ‘unfair’ fees and penalties dished out by banks, HBOS were quick to suggest defeat for banks would spell the end of ‘free’ banking. They said:
‘The ongoing investigations into bank charges and payment protection insurance may both lead to changes in pricing structures in those markets.’
Chris Eagle, Commercial Manager at CreditChoices, can see similarities between the Halifax and Lloyds TSB survival models:
‘Both Lloyds and Halifax have decided to take a pragmatic, low risk approach to navigating their way around the credit crunch. While this is currently working out for each bank, borrowers will find it increasingly difficult to take out personal loans or increase overdrafts. Defeat in the OFT test case would signify a transient victory for those who have submitted compensation claims for unfair overdraft fees, but the fallout could spell the end of ‘free’ banking.’
