Britain's second biggest mortgage lender Abbey National tumbled to its first annual loss today, halved its dividend and took a knife to costs, but its shares bounced on a sense all the bad news was now known.
Abbey slumped to a pre-tax loss of £984 million ($1.55 billion) last year from a profit of £1.47 billion, hit by bad debts from an ill-fated move into corporate banking.
The company said it expected to shed jobs and was aiming to cut more than £200 million in costs from its core retail bank business. Abbey shares, which have underperformed European peers by 50 per cent over the last year, rallied as much as eight per cent to a high of 404p, then eased to 402-1/2p.
Abbey's venture into corporate banking - charging high interest rates to companies with low credit ratings - reaped rewards during the late 1990s boom, but the strategy turned sour as the bear market set in and bad debts soared.
The group's financial woes tempted a bid approach last year by Bank of Ireland, which failed. Abbey also shook off a hostile bid by rival Lloyds TSB in 2001. In the first set of results since Arnold took over, Abbey also announced a 50 per cent cut in its full year dividend to 25 pence and added future payout policy would be uncertain until it completed its restructuring.
Abbey reiterated its plan to focus on its profitable retail banking operations, which have benefited from Britain's booming house market. "We start from a very strong position and have 16 million customers," CEO Arnold told reporters.