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Halifax unveils Net venture
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October 5, 1999: 7:56 a.m. ET
Top U.K. mortgage lender to invest $1.4B in Internet banking move
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LONDON (CNNfn) - Halifax Group, Britain's No. 1 mortgage lender, said Tuesday that it would invest almost $1.4 billion over the next three years to develop Internet banking operations.
The bank said the capital would be used to establish a new, stand-alone Internet banking unit to target new customers. The money will also finance the expansion of its Halifax Direct unit into Internet banking and on-line share trading, which the company announced Monday.
The bank plans to invest more than 100 million pounds ($165 million) in the two ventures. It will also pledge more than 750 million pounds ($1.2 billion) over the next three years to underwrite the business, a safety net required by international banking regulations.
"The capital backing is an indication of how big we expect the business to become," a Halifax spokesman told CNNfn.com.
The bank said the new, stand-alone venture, temporarily dubbed Greenfield.co, would "particularly" accelerate the diversification of Halifax's earnings.
Analysts welcomed the moves, with the bank increasingly under pressure in its core mortgage business as competition in the sector hots up. "It is a welcome development that the Halifax has recognized which way the market is going," Mark Thomas, banking analyst at Credit Lyonnais Securities in London told CNNfn.com.
The development mirrors similar moves by such rivals as insurer Prudential, which last year set up its highly successful Egg Internet banking service.
The appointment of Jim Spowart, one of the pioneers of direct banking, as the head of Greenfield.co also met with warm approval. Spowart joins from Standard Life Bank, which he set up three years ago, and quickly started taking market share from its larger rivals in the mortgage market.
"Spowart's appointment is definitely a coup. We hold him in very high regard," said Thomas. Greenfield.co will go operational in six months with its own distinct branding and organization
"The opportunity to build a new Internet-led financial services business, enjoying the full backing of a company with the resources that Halifax has at its disposal, is irresistible," Spowart said in a statement. He resigned his position at Standard Life Bank Monday, in a move that shocked the industry.
Thomas was more downbeat on the wider prospects for the Halifax, however. He pointed to a note circulated to analysts by chief executive James Crosby, with news of the latest ventures, that appeared to rule out Halifax's participation in consolidation of the banking sector.
"The apparent dismissal of consolidation is unwelcome," he said. Crosby said in the note that the company would pursue organic growth rather than pursue attempts to put "tired and old business together," according to Thomas.
"The Halifax needs to do something to adjust its cost base, and that is best achieved through consolidation," Thomas said.
Halifax shares were 2.8 percent higher at 765 pence in London.
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