Widows stands up to 'turbulent' markets

Insurance giant's banking arm makes £33.6 million profit

THE banking arm of insurance firm Scottish Widows has today announced double-digit profit growth, despite the "turbulent" market conditions.

The firm saw a ten per cent increase in profits for 2008, to £33.6 million, despite the massive problems affecting the banking sector.

The Edinburgh-based company, which offers mortgage facilities, internet and telephone banking, said retail lending for the period had grown to £6.62 billion, up 13 per cent from £5.86bn the previous year.

The company said it would now look to build on the success of the past year.

The bank, part of the Lloyds Banking Group, saw total customer deposits for the full year rise seven per cent to £2.73bn, while costs remained steady, with a cost/income ratio of 40 per cent of the business.

The success was partly due to the business keeping down its mortgage arrears, which were just a tenth of the national average.

The bank, which had offered mortgages of more than 100 per cent at the height of the housing boom, said mortgages more than three months in arrears at the end of last year accounted for just 0.2 per cent of its book, compared to around two per cent nationally.

Graeme Hartop, managing director of Scottish Widows Bank, said: "Our overall performance last year was strong against a background of considerable change and market volatility.

"Our strategy of offering consistent, long-term good value to our customers, with a balanced approach to risk, has been key in delivering these results."

The results showed that the second half of the year was slightly slower than the first six months, when the bank saw a 12 per cent rise in pre-tax profits to £16.4m, boosted by a strong performance in its mortgage division as competitors withdrew their products.

Loan-to-value ratios for the bank's mortgages have slipped, from around 85 per cent to 55 per cent, and this was down to the changes in market conditions.

Mr Hartop said: "The market has changed considerably over the last six to nine months. There has been a number of criteria changes. Our typical product range of specialist offsetting and flexible mortgages are selling well at the moment. This has continued but at a slightly different LTV than we would have had before."

Mr Hartop admitted that changing markets also meant it was working harder to attract savers.

The bank has lost a number of staff over the last year, however, with around 40 full-time staff redeployed within the wider company, leaving the bank with around 260 full-time staff.

"What we have been doing is to use our resources in the business in the best way we can," said Mr Hartop. "Looking to the future our key priority is to build on the success of last year and develop in our chosen markets, while maintaining a close focus on risks"