UK lender Alliance & Leicester has reported a 1.5% dip in earnings for the fist half compared to last year, as a slowdown in the unsecured lending market and restructuring costs hurt profits.
Operating profit for the interim was GBP268 million compared to GBP272 million in the year ago period.
Group chief executive Richard Pym said: Alliance & Leicester is changing, and the pace of that change is accelerating. We remain confident of our strategy and of our ability to deliver it.
Lower gross advances and an increased impairment loss charge, reduced profits from unsecured personal lending by GBP19 million in the first half of the year, compared with the same period last year. The bank also recorded a charge of GBP14 million for redundancy costs, related to its back office restructuring. Excluding the redundancy charge, operational costs were GBP6 million lower for the first half of 2006 compared to last year.
The bank said that it has taken measures to tighten its credit lending criteria and lending quality is improving, while defaults seemed to have peaked. UK personal insolvencies have reached record highs, with the level in the first quarter of 2006 being 14% higher than in the final quarter of 2005, the bank said.
For the full year, the bank said that it expects that its net interest – the difference between the interest that it pays on deposits and the interest that it charges on loans – would continue to decline from 1.3% in the first half. The group’s cost base is also expected to increase and there will also be a further GBP11 million of redundancy costs. The bank said that over the whole year it is expecting that total revenues will grow faster than total costs.