A&L mortgage lending up 74%

A STAGGERING 74% rise in mortgage lending over the past 12 months helped Alliance & Leicester power to better-than-expected first half profits.

The news put a serious gap between the former building society and Abbey National, currently recommending an £8bn takeover from Banco Santander. While Abbey's profits from its core retail banking dropped 20%, A&L's pre-tax profits grew 22% to £320m in the six months to end-June.

Chief executive Richard Pym said: 'We have delivered growth in all core product areas, particularly mortgage lending which is up 74% compared with this time last year.

'This growth is adding valuable business for the group and has been achieved without changing our high credit standards.'

He repeated the group is still well on track to meet its target of delivering double-digit earnings growth in 2004.

Last month, A&L announced the closure of 46 branches with the loss of 310 jobs, which accounted for a £10m exceptional charge.

That helped bring the increase in operating profits down to a mere 2% at £268m. Underlying earnings rose 7% to 42p per share with the interim dividend going up 10% to 15.7p.

Pym admitted the bank may now find it difficult to hit revenue targets because the upfront costs of winning new mortgage customers had been higher than expected.

He said that, in the second half, the mortgage mix would change with lower upfront costs helping to improve margins.