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Abbey soothes investors
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February 14, 2001: 7:39 a.m. ET
Lender seeks shareholders' support ahead of Lloyds' bid decision
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LONDON (CNN) - Abbey National, fighting a hostile takeover, sought to reassure investors by announcing upbeat earnings before a key regulatory decision.
Britain's second-largest mortgage lender rushed out its full-year earnings a week ahead of a regulatory decision on February 23 on whether to allow Lloyds TSB's £19 billion ($29 billion) bid to proceed.
Abbey is seeking a friendly merger with Bank of Scotland, but Chief Executive Ian Harley indicated to CNN those talks have stalled while the bank resolves the Lloyds issue.
Abbey has rejected Lloyd's offer, saying it undervalued the lender and would limit competition.
"The (regulatory) decision could come on Friday or on February 23, so we have released our results to facilitate discussions with our investors," according to Harley.
Harley said talks with the Bank of Scotland were on hold, while it sought a "resolution to the Lloyd's situation before doing anything else." He said an Abbey, Bank of Scotland merger would deliver value for shareholders.
The Office of Fair Trading is expected to deliver its verdict on Lloyds' bid for Abbey by February 23. The regulator may chose to refer the bid to the Competition Commission, which would hold up any merger for another six months.
Abbey said full-year net income rose to £1.37 billion, or 92.8 pence a share, from £1.26 billion, or 85.5 pence a share, a year ago. Pretax profit climbed to 11 percent to £1.97 billion, a fraction above analysts' forecasts.
"Overall, the results are ahead of expectations and it gives the company an argument to fight for in the ensuing debate which I think the shareholders are expecting," Tim Rees, Director of UK Equities at fund manager Clerical Medical told Reuters.
Abbey's Harley told CNN that the results were "satisfying" because "50 percent of profit came from new business."
The mortgage lender has been diversifying from low-margin mortgage and savings markets. Abbey increased its net mortgage lending to £3.2 billion, representing 7.9 percent share of the market. But this was still well below its natural market share -- the share of existing mortgages -- of 13 percent.
Abbey National said more than half of its profits had come from businesses other than mortgages and savings, including wholesale banking, where profits were up 37 percent, and life assurance, which produced a 29 percent profit increase.
But retail banking, battling fierce competition from new providers, increased profits 5 percent to £1.28 billion. The retail banking margin -- a gauge for profitability -- was 2.3 percent against 2.45 in the previous year.
Abbey (ANL) shares fell 1.9 percent to 1,201.5 pence in midday trade in London.
-from staff and wire reports 
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