British retail bank Alliance & Leicester said today its performance in 2004 was in line with market expectations but warned of slowing growth and tough competition.
The bank said it was on track to meet its 2004 target of a double-digit percentage increase in earnings per share and faster revenue growth.
But Alliance & Leicester's core business of mortgage lending slowed in the second half of the year and profit margins will continue to be squeezed, the company said in a trading statement.
An analyst consensus forecast put 2004 pre tax profit at £549 million, up 4.6 per cent from 2003, the bank said.
This year's estimate excludes a £52-million one-off gain from the sale of a payment processing business.
Gross mortgage lending, the former building society's biggest business, was £7.6 billion in the first nine months of 2004, giving it a market share of 3.3 per cent.
Alliance & Leicester is the latest UK bank to update investors on trading ahead of full-year results.
Larger rival HBOS's shares surged yesterday after the bank said it could maintain growth even amid a slowing market as Britain comes to the end of a long consumer and house-price boom.
Credit quality remains strong, including in unsecured lending, Alliance & Leicester said.
Unsecured personal loans rose 14 per cent to £1.8 billion in the first nine months, though credit card sales were down, it added.
The bank forecast narrowing retail banking margins, though it said the rate of decline would slow.
The bank said it was targeting a 20 per cent return on Tier 1 equity, plus or minus 3 per cent, in each of the next three years.
The company's stock gained 0.7 per cent this year, making it the number-six performer among the UK's 10 listed banks. Alliance & Leicester is due to post 2004 results on February 25th.