Abbey National, the UK's second largest mortgage bank, today reported a 15 per cent rise in first half profits, but an unexpected jump in bad debt provisions and acquisition worries jolted the shares.
Strong performances from Abbey's retail and commercial banking operations were the main drivers of the profit increase, which banking analysts said was broadly in line with expectations.
Yet worries on costs and a rise in bad debt provisions in commercial or wholesale banking knocked more than four per cent off the shares, which traded down 52 pence at 1,185p on the London markets this morning. The stock has outperformed the UK banking sector by seven per cent this year.
Concerns over the level of debt provision is a key issue in the current bank reporting season, as economic slowdown threatens the benign conditions banks have lately enjoyed.
In wholesale banking, where profits rose 17 per cent to 307 million pounds, Abbey blamed a slowdown in global markets for provisions jumping to 64 million pounds from 10 million.
Fund managers and analysts said Abbey's comments that it was on the lookout for possible acquisitions had also heightened uncertainties and weighed on its share price.
"At best it (the results) is up to expectations", said Mr James Johnson, analyst at Credit Lyonnais Securities."Income was as expected, costs were disappointing", he said, adding that Abbey's statement on acquisitions might increase nervousness, given the bank's mixed track record on deals.
Abbey National had faced an unwanted takeover bid this year from rival Lloyds TSB Group. The deal was blocked by the UK government on competition grounds.