HBOS to launch 'fee-free' account

MORTGAGE lender HBOS is about to launch a fresh attack on the Big Four banks' stranglehold on the lucrative current account market. Chief executive James Crosby said he will shortly unveil a fee-free packaged account offering benefits such as travel insurance and a 'very competitive' credit interest rate.

Crosby claimed that 6m customers pay a total £500m a year fees on packaged accounts to high street rivals. 'They can come to us and get it for nothing,' he said. 'Customer inertia is dead.' HBOS has already poached more than a million current account customers from the Big Four.

Benefits from the merger of Halifax and Bank of Scotland are running ahead of plan, with the target for 2005 raised to £800m from £690m. Ebullient, Yorkshire-born Crosby boasted he had created a 'virtuous circle' of better-value products and reduced costs that benefited both customers and shareholders.

Annual pre-tax profits rose 26% to £2.9bn. Dividends increased 5% to 29.4p, giving the average small shareholder a £94 annual payout.

Crosby is 'comfortable' with the prospects for the housing market. 'Prices in London will pause for breath,' he said, 'and 2003 will be the year of the north.' But HBOS sounded a cautious note for the year, saying economic uncertainty and international instability may last for some time.

Profits at the retail bank rose 18% to £1.46bn. Insurance and investment profits surged 25% to £589m, despite an 'annus horribilis' for the stock market. HBOS had to pour £800m of capital into its life assurance arm Clerical Medical in the past 18 months to fund new business growth.

Bad debt provisions rose from £608m to £832m last year. But the bank, which is funding Philip Green in his assault on Safeway, saw profits from corporate lending grow 30% to £681m.

Crosby admitted the £3.4bn staff pension schemes had a £795m deficit under new accounting rules. HBOS will increase its contributions into the funds, which are closed to new members.