Abbey National: Turnaround plan

The UK's sixth largest bank and second biggest mortgage lender posted a loss of �984m ($1.6bn) for 2002, compared with a profit of �1.47bn a year earlier.

It also slashed its dividend in half, and said it was looking to save �200m in its core personal finance business - which could mean job cuts.

However, its performance was not as bad as some analysts had feared, and its shares stood more than 10% higher at one stage on Wednesday.

"Abbey is a mess, the results are awful but it had been well trailed that they were going to be awful and the shares had been marked down in the run up," said one trader.

The stock closed up 5p at 378p.

Turnaround plans

I would like to express our regret at the results we have announced Luqman Arnold, chief executive, Abbey National

The group warned in November that it would report a loss, blaming higher-than expected banking provisions, the falling value of previous acquisitions and charges on stock options and pension costs.

The group has described its performance in 2002 as "extremely unsatisfactory".

Finance director Stephen Hester said job cuts were likely but added : "We do not have a number".

"On behalf of the whole board, I would like to express our regret at the results and dividend cut that we have announced today," said chief executive Luqman Arnold.

But the troubled group used its results to give details of its turnaround plan.

Mr Arnold, who took over from the ousted chief executive Ian Harley last summer, said the group would sell or wind-down all non-core businesses within the next three years.

Up for grabs

Abbey's portfolio includes a host of widely varying businesses, including a train leasing company, 5% of Sydney airport and a car credit business.

Critics have also blamed the group's foray into corporate banking for its woes.

This allowed Abbey National to charge high interest rates to companies with low credit ratings - a move which produced strong profits in the early 1990s but led to a high level of bad debts when the weaker economy took hold.

Reports have suggested the company has assets of up to �2bn to sell in order to return to its banking roots.

Dividend wait

Abbey National's share value has plummeted

The new management team has said it plans to scale back the corporate loans business and concentrate on its profitable mortgage division.

Mr Arnold said its core business had made a profit of �1.2bn in 2002 and that he was confident of its prospects.

"We start from a very strong position and have 16 million customers."

The group also said it would look to restore dividend growth, after cutting it in 2002 to 25p per share - half the 50p per share it gave in 2001.

Last month, the group also warned that it would cut pay-outs on its with-profits savings policies from March, blaming three years of falling stock markets.

Abbey National's woes prompted a takeover approach from rivals Bank of Ireland last year, which failed, as well as a hostile bid from Lloyds TSB in 2001.