Game of two halves

27 February 2008 By Mike Verdin

First, the old Halifax business lost its way in the UK mortgage market. Now the old Bank of Scotland business has seen impairments shoot up because of risky corporate lending. Hornby, the CEO wunderkind, needs to get a grip.

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HBOS, the UK bank, announced a 6.1% fall to £2.7bn in underlying pretax profits for the second half of 2007, on revenues up 2.5% at £6.5bn.

Profits in the group's retail division fell 21% to £980m on revenues down 4.4% at £2.7bn.

The corporate division raised profits by 11.4% to £1.1bn despite a 45% rise, to £370m in provisions for bad loans. The increase followed a review of the outlook for a number of high risk credits in the corporate loan book, the bank said.

HBOS forecast that global market conditions would remain uncertain this year. It added that it expected slower growth in corporate lending and lower gains from investment sales.

The immediate market reaction was to send HBOS shares 10% lower to 633p.

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