Abbey National open to offers as profits plunge

ABBEY NATIONAL says it is open to takeover offers following a 35% fall in pre-tax profits.

Analysts have linked Bank of Ireland to the company, which is Britain’s largest mortgage lender.

The group reported first-half profits yesterday of just under £700 million, down from over £1 billion a year ago.

Finance director Stephen Hester said the embattled retail bank and mortgage lender is open to takeover offers. Mr Hester said if the company received what the board considered a viable bid, he would put it to shareholders.

He said: “If anyone were to approach us with something that looked great to our shareholders, we’d be the first people to want to put it to them if we thought it would offer them a better deal. We’re not in any way closed-minded about it.”

Abbey National last year had merger plans with Lloyds TSB blocked by regulators.

The group has been the focus of takeover speculation after a failed move into corporate lending and higher risk investment products caused its profits and share price to slump.

Last week, the company ousted its chief executive Ian Harley, who analysts viewed as an obstacle to any attempted takeover of the firm.

But Eamonn Hughes, banking analyst with ABN Amro, dismissed Abbey as a target for Bank of Ireland.

“The numbers are too big,” he said. “While the numbers on a merger are less taxing, Bank of Ireland shareholder’s would end up with a minority position in a deal that would generate only modest synergies (probably no more than 5% of the combined cost base).

“In addition to the numbers, we believe that a deal would make little strategic sense for Bank of Ireland shareholders.”

He added that a merger would increase Bank of Ireland’s exposure to the British mortgage market at a time when the long-term prospects and health of the mortgage market generates heated debate.