Abbery overhaul to cut risks

ABBEY National underwhelmed the City with its plans to overhaul its accident-prone wholesale banking division. The shares shed 6p to 922p on Tuesday after the mortgage bank unveiled its proposals to reduce risks.

Investors have already seen their shares fall 79p to 928p this week on revelations of write-offs on junk bonds and private equity.

Chief executive Ian Harley and his lieutenant, Mark Pain, parachuted in to head wholesale banking late last year, will embark on a charm offensive aimed at shareholders later this week.

Pain plans to focus on areas such as public-private partnership projects. He said Abbey has drawn a line under its junk bond losses, using a £1bn bond issue, to sell most of its risk on to other investors. Its maximum remaining exposure is £120m.

Harley's future in the top job is uncertain. A takeover by a UK rival is unlikely because of competition concerns, so shareholders may instead demand board changes. Analyst Mark Thomas of Fox Pitt Kelton said: 'Management credibility has been undermined materially.'