Abbey expected to split up business

Abbey National is expected to outline plans to split its business in two when it reports its full-year results later this month, it emerged today.

It is thought the UK’s sixth largest bank will run its core personal finance business as one unit and its loss-making businesses, such as its troubled wholesale banking division, as another.

The group’s new chief executive Luqman Arnold, who was appointed in October, has made no secret of the fact that he wants the group to focus on its retail banking business, which offers products such as mortgages, current accounts and loans.

But it is thought he will give further details on February 26 on which businesses Abbey aims to sell off or close down in the long term.

No timescale has so far being given for the turnaround, but it is thought the process could take as long as three years to complete.

An Abbey National spokeswoman said: “We have said we are focusing on UK personal finance and disposing of non-core businesses.

“But we haven’t made any comment on what these businesses will be and the timeline involved.”

The group, which currently has 750 branches, recently launched a “trade-in” campaign, under which it promises to pay £50 to anyone who does not save money by moving their mortgage, current account or credit card to the Abbey.

Last week Abbey also became one of just two major lenders to announce they would be passing on some of the Bank of England’s interest rate cut to borrowers, reducing its standard variable mortgage rate by 0.15% to 5.79%.

Problems at Abbey’s wholesale division, which provides loans to corporate clients, were behind a shock profits warning made by the group in June, and later led to former chief executive Ian Harley being ousted.

In June the group warned its full-year pre-tax profits would fall “substantially” short of expectations after being hit by the cost of writing off debts at its wholesale banking arm, which had exposure to collapsed US energy firm Enron.

It said results for the year would be would be down on the £1.9 billion expected by the market and also recorded last year.

In November analysts estimated that bad debts and investments at the wholesale division would lead to write-downs of £300 million in the bank’s full-year results.

There has also been speculated that the group will halve its dividend to 25p and could even report its first pre-tax loss.

Shares in Abbey closed at 423p on Friday, well down on its high for the past 12 months of 1148p.