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Lloyds boosts profits
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February 16, 2001: 8:01 a.m. ET
Bank fires latest salvo in $29 billion takeover bid for Abbey National
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LONDON (CNN) - Lloyds TSB unveiled the latest move in its pursuit of Abbey National on Friday: a 7 percent increase in profits for 2000.
Lloyds TSB, the UK's third largest bank, reported pretax profits of £3.89 billion ($6.67 billion) in 2000, up from £3.62 billion, and said it would not walk away from its £19 billion pursuit of mortgage lender Abbey.
Lloyds (LLOY) stock fell 3 percent in London after the earnings. Tim Rees, head of UK equities at asset manager Clerical Medical, said the detail in the results might disappoint investors.
"You've got an issue here where income is up by less than cost base, and you can understand why the company wants to do a deal with Abbey National to assist it in controlling its cost structure," he told Reuters.
Alex Potter, banking analyst at Commerzbank, told Reuters Lloyds could afford to dig deeper to win over Abbey:
"They could pay more cash certainly. They could probably just about afford another 10 percent."
Lloyds' bid is worth around 1,290 pence per Abbey share, made up of 1.5 Lloyds shares and 260 pence in cash.
Abbey has already rejected Lloyds' advances, preferring to work towards a merger with Bank of Scotland.
Abbey (ANL) shares were trading 3 percent lower at 1,188 pence. Bank of Scotland (BSCT) shares were flat at 775 pence.
A Lloyds/Abbey merger would create the UK's second biggest bank, but could mean 9,000 job losses and 600 branch closures.
Lloyds has estimated the deal would deliver £950 million in annual cost and revenue synergies by 2005.
Profits from UK retail banking rose by 2 percent to £1.68 billion overall, but profit from mortgages fell by £3 million to £865 million.
The banks are waiting for a decision on whether Lloyds' plan will be allowed to proceed by the government. Trade secretary Stephen Byers has until February 23 to decide whether to refer the deal to the Competition Commission, for what could be a six-month review.
Chief executive Peter Ellwood said in a statement that 2000 had been a "watershed year" for the financial services industry, and warned: "the future for the financial services sector will undoubtedly be more challenging than it has been in the past." 
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