Alliance & Leicester plans buyback
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LONDON, England (Reuters) -- British mortgage bank Alliance & Leicester reported annual profits near the top of market forecasts on Friday and said it would buy back shares this year, but the news failed to ignite its share price.
The bank, which has been more cautious than some of its rivals in lending into a booming domestic housing market, reported record pre-tax profits of £525 million ($995 million) for calendar 2003, up 12 percent from 2002.
It also said it would buy back between £100 million and £150 million of shares this year, but that failed to support the share price which sank 2.9 percent to 883p in early trade.
"It's not the figures but what's in the statement that counts. Revenue growth and the buyback aren't quite as much as expected,'' one dealer said. Net interest income fell 2.5 percent in 2003 and non-interest income rose 8.8 percent.
Alliance & Leicester Chief Executive Richard Pym has focused on four consumer banking products while clamping down on costs. The bank has been cautious on mortgage lending while rivals such as Northern Rock have piled on assets.
"They can't compete in the mortgage market against the likes of HBOS and Northern Rock but they do have some possibility of gaining in personal loans,'' said WestLB analyst James Hamilton. "Over the cycle is there going to be a problem provision-wise with that?''
Alliance & Leicester said it would issue up to £300 million of non-equity tier-one capital in the first half of this year.
The bank's profit of £525 million compared with a market expectation of £520 million, according to the median forecast of a Reuters poll of 10 analysts. The range was £491 million to £529 million.
Asset quality
The bank said asset quality was strong, including for unsecured personal loans, where some investors have been concerned about its increased lending. The bank had record gross unsecured lending of £1.9 billion, up 36 percent.
The bank had record gross mortgage lending of £8.1 billion, up 27 percent on 2002, though its share of mortgage balances fell to 3.3 percent from 3.5 percent.
Mortgage lending accelerated in the second half of 2003 and the bank said it expected no significant change in lending to its residential customers this year.
The bank said it achieved its main target of increasing earnings per share by at least 10 percent, with EPS rising 16 percent to 79 pence. The buyback is part of its plan to hit the target again this year, the company said.
The company said it is on track for £100 million of cost cuts by the end of this year from 2000. The full-year dividend rose 10 percent to 43.9 pence a share.
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