British bank HBOS reassured investors today, saying rising retail bad debts were in line with its expectations and that it was on track for targeted first-half profit growth.
"Retail credit trends continue to develop as anticipated," Britain's biggest mortgage lender said in a trading statement. "For HBOS, non-performing retail assets have therefore continued to increase, in line with previous guidance."
HBOS said in March that retail bad debts had risen, prompting it to tighten lending. Rival Barclays alarmed investors last week by saying credit-card provisions would cause annual bad debts to rise quicker than expected, and HSBC has warned of worsening retail loan quality.
Revenues are "usefully ahead of last year", margins are stable and costs are under control, HBOS said as it updated investors before first-half results due on August 3.
"Critically ..., the deterioration in retail is in line with previous guidance and there has not been a material worsening in expectations," Keefe, Bruyette & Woods analysts with an "outperform" rating on HBOS said in a note to clients.
HBOS has expanded massively since its formation from the merger of Halifax and Bank of Scotland in 2001. The bank posted a 22 percent increase in 2004 pretax profit to 4.6 billion pounds in March as it took market share in credit cards, current accounts and personal loans.
Net mortgage lending is robust and first-half market share is in line with 2004, HBOS said. The bank, Britain's fourth-biggest, said it was on target to buy back 750 million pounds of its own shares this year.
Basic earnings per share for 2004 were reduced by 4 percent to 74.9 pence under IFRS accounting standards, the bank said in a restatement of last year's results before the introduction of the new accounting standard in Europe.
HBOS's shares were up 0.4 percent at 804 pence at 0718 GMT, ahead of the little-changed FTSE 100 index . The lender's stock had underperformed the UK banks sector by about 1 percent this year before Wednesday.