Slow start for Intelligent Finance

INTELLIGENT Finance, the Internet and telephone bank owned by HBoS, has attracted fewer than half the number of customers it was aiming for in its first year of operation. IF, whose launch was delayed three times before finally going live last November, promised to attract 500,000 customers in its first 12 months. In the event, just 242,000 people have signed up.

Despite this disappointment, chief executive Jim Spowart remained upbeat. 'We are winning the hearts and minds of consumers - many customers are leaving the big four and joining us,' he said.

The bank is currently loss-making but expects to break even by the end of 2003, as predicted when it launched. IF offers so-called integrated accounts, where mortgages, credit card balances, savings and current accounts are all housed under one roof. Interest rates are calculated daily on customers' overall balances and IF estimates that 18m households would benefit by £595 a year on average by adopting this approach.

At the end of its first year, IF has balances of £6.4bn with a further £2.5bn in the pipeline. More than £750m is coming into the business and it has captured 9% of the net mortgage market, up from 7% in June. Savings and current account balances amount to £2bn.

Spowart, who was poached from Standard Life Bank, discards suggestions that IF is winning business at the expense of its owner. 'Over 90% of our customers are new to the group,' he said. Much of the business is derived from independent financial advisers and remortgages, 12% of which are reckoned to come from Nationwide Building Society and Standard Life.

The operation is attracting more well-heeled customers than most lenders. Average savings balances are £16,700 compared with the national average of £5,446. Average mortgages are £95,000 with a loan-to-value of 63%, compared with industry averages of £75,399 and 71.5% respectively.

Spowart shrugged off suggestions that IF may be hit by the economic slowdown. 'We don't see any downturn in the market. Business is booming,' he said.

IF has had more than 160,000 current account applications in the past year. 'The age of inertia is almost over,' said the bank.

The City remains sceptical. 'We will not be adjusting our HBoS numbers or recommendation on the back of this performance,' said Mark Thomas of Fox-Pitt Kelton.