Uncertain financial markets for 2008
March 12, 2008
Officials from the bank, HBOS, which was former through a merger between the Halifax and the Bank of Scotland, have stated that this year is going to be an uncertain and turbulent one for the financial markets. The bank reported a 4% drop in profits, and amongst the factors that have affected these profits are higher costs involved in raising funds for mortgages from the wholesale money markets, which is a problem that has hit all lenders since the credit crunch took hold last year.
The bank reported pre-tax profits of £5.47 billion last year compared to £5.7 billion for the previous year. Officials also stated that mortgage sales had improved in the latter part of last year but had been disappointing in the first half of 2007. Like other lenders, unsecured lending has taken a fall at HBOS with the bank exercising increased caution over who it will risk lending money to.
Officials also commented on the High Court test case into bank charges, which was brought by the Office of Fair Trading, and on which the industry – and the country – is still awaiting a decision from the presiding judge. HBOS officials stated that if the banks lose the case the way that they charge customers could be changed significantly.
One official said: “Regulatory intervention is an ongoing feature of UK retail banking and changes could affect the profitability of our business. The ongoing investigations into bank charges and payment protection insurance may both lead to changes in pricing structures in those markets.”
However, the bank does expect string growth in deposit from savers, adding: “We are well placed to take opportunities presented by these difficult markets and deliver good growth in shareholder value over the next few years.”
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