Abbey: 'There are no black holes'

ABBEY National has assured the City that it has given a solid performance in its third quarter, saying the sudden departure earlier this month of wholesale banking chief Gareth Jones did not mean anything was wrong.

Chief executive Ian Harley said: 'There are no black holes and if there were we would have had to say so. There are no serious problems and we are continuing to expand the business, as we have shown by opening a branch in the US - in Connecticut.'

In the core retail banking business gross lending, primarily mortgages, had risen by 50% year-on-year to £5bn in the past three months and net lending was up by £2bn. Harley was confident about the housing market, saying there was no particular sign of a downturn. He added that October could be even more buoyant than September despite a softening in a few areas, particularly central London.

The only black marks in the autumn business statement were in the motor and retail divisions of First National Finance. Harley said a consumer strike on car buying, notably in the second-hand market, combined with the group's emphasis on credit quality, meant volumes had fallen by about 10%. A similar buyers' strike had hit sales of personal computers and their accessories even harder. Sales were down by 15% and margins were under pressure.

Although First National's other two divisions, consumer finance and business finance, continued to do well, its overall pre-tax profits will be down by some £60m on last year's £147m.

Harley confirmed that Abbey could sell the retail division. 'We are actively pursuing a couple of external enquiries which look reasonably serious,' he said, but would not confirm analysts' estimates that the business could fetch up to £300m.

In wholesale banking, he said, there had been no significant deterioration in credit quality in the quarter but added that the impact of heightened volatility in the US remained uncertain. On the junk bond side, the bank had sold some holdings and 'had not been buying any for the last 12 months'. Junk is now less than 7% of the total wholesale banking portfolio, down to £1.7bn from £1.8bn at the half year.

Harley said he remained comfortable with City expectations for the full-year. Consensus forecasts are for profits of just over £2bn. Abbey posted a pre-tax profit of £1.98bn in the year ended December 2000.