HBOS joins bank spree

HBOS kept up with its banking peers in reporting strong interim profit growth but its retail business was hit by lower mortgage lending and the OFT's clamp-down on credit card fees.

Morningstar.co.uk Editors 1 August, 2007 | 10:59AM

Underlying profit before tax rose 13% to just under £3bn in the six months to June. This was ahead of analysts’ expectations of £2.88bn. The interim dividend rose 23% to 16.6p. The group's dividend yield was already high at 4.99%.

Retail makes up almost a third of the group’s profits at £1.04bn. This represented an 8% decline over 2006. Mortgage lending was lower as the group’s market share dropped from 21% to 19%. This reflected a new pricing strategy to improve margins and to stop borrowers paying off debt early.

Not only has this strategy proved unsuccessful, with borrowers continuing to pay off debt at the same rate as last year, banks are now being forced to drop any excessive exit fees on their mortgages. HBOS has abandoned the strategy.

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