Black is back as Abbey rises out of the red

By This Is Money
Updated: 05:57 EDT, 8 February 2006

THE turnaround of Abbey National looked on track today as it bounced back into the black in its first full year of Spanish ownership.

The bank - bought by Banco Santander Central Hispano in November 2004 for £9.5bn - said it had turned pre-tax losses of £21m in 2004 into profits of £596m last year.

Trading profits before tax, which ignore Santander's restructuring costs, were up 34% to £775m.

In a trading statement, Abbey said it had slashed costs through thousands of job cuts and increased revenues at its branches.

Abbey initially expected the overhaul by Santander to save it £100m in 2005 but the target was raised to £200m in October. Today Abbey said savings reached £224m for the year following 4,000 job cuts with more to come.

The lower costs combined with better-than-expected revenues which increased slightly from £2.5bn in 2004 to £2.52bn in 2005.

Abbey chief executive Francisco Gomez-Roldan said: 'Today's results clearly show that we are on track in our efforts to turn Abbey around. 'We have exceeded our targets we set for 2005. We've made excellent progress in reducing costs across the business, and there are early but clear signs of sustainable revenue growth.

'We have set ourselves clear targets, and we will build on the momentum we have established in 2005 and expect further improvements in customer service and business efficiency in 2006. We've made a good start towards achieving our three-year turnaround and long-term goal of becoming the best retail bank in the UK.'

Santander said net interest income, or its earnings on basic lending and borrowing, rose 38.3% to 10.74bn euros.

Without Abbey the rise would have been 14%.

Santander said three-quarters of its three-year savings targets at Abbey had been completed in the first year after buying Abbey.