The healthy return has led the bank to offer share bonuses to its staff worth some GBP67 million – or 5% of their annual salaries – as a reward.
Like its peers in the retail banking sector, HBOS made clear its concern over rising bad debt among fears that the consumer credit frenzy among Britons may be drawing to a close. At the end of June 2006, HBOS had GBP2.1 billion in reserve to cover bad debts, an increase of some 30% on the year-ago figure. Bad loans for the six months totaled GBP6.7 billion.
We continue to view the unsecured personal loans market in pricing terms as generally unattractive. Accordingly, and reflecting a slower pace of activity in this market, balances are unchanged from December 2005. In credit cards, however, market pricing has improved and thus return prospects maintained and we have acquired 0.4 million new accounts, the bank said in a statement.
Underlying profits for the general insurance business increased by 22% to GBP163 million and underlying profits in its investment business increased by 12% to GBP124 million.
The company said that its 22% profits growth in general insurance reflected strong retention and underwriting performance, offsetting the 2% dip in sales typical at this point in the competitive pricing cycle. General insurance sales showed contrasting trends with household sales growing by 11% offsetting slower repayment insurance sales, down 6% reflecting lower lending volumes in the unsecured market.
Motor insurance sales in a highly competitive market were down 11%, the company said.
Today’s results show with real clarity organic growth is at the absolute core of what we’re about, chief executive Andy Hornby told Reuters.
