Bank of Scotland, which has just merged with Halifax to create UK bank HBOS, reported a 7% rise in first half profits today, helped by strong lending growth in corporate banking.
The Edinburgh bank's pre-tax profits before exceptional items in the six months to June 30, 2001 rose to £571 million from £535 million. Bad debt charges increased to £236 million from £172 million.
The results, the last from Bank of Scotland as an individual entity, were reported on a pro forma basis because the Scottish bank had a different year end from Halifax. Halifax reported its first half results in July, when pre-tax profits fell as expected as the bank cut prices to gain market share in mortgages and other retail banking products.
HBOS said the merger, completed on September 10, was on track, with all the top 300 management appointments now made. The bank also confirmed the deal would deliver a base level of cost and revenue synergies of £620 million a year, the same figure the two banks had estimated in May.
Bank of Scotland's underlying costs rose by 12% in the half year, while operating profit before provisions and exceptionals was up by 14% to £784 million. The merger with Halifax, creating one of Europe's top 10 banks by market value, cost Bank of Scotland £40 million.
The two banks announced plans to link up in April as an all-share merger of equals. James Crosby, the former Halifax chief executive, keeps that role at HBOS, while Bank of Scotland chief Peter Burt is deputy executive chairman.
HBOS is already the largest in UK mortgages and aims to challenge the UK's main four banks in small business banking. But there are concerns that the bleak economic outlook in the wake of the U.S. attacks could make it tough to deliver promised cost and revenue benefits. Cost reductions will come partly from 2,000 job cuts over three years.
