16th Mar 2007 07:30
Abbey National PLC16 March 2007 Abbey National plc - Preliminary Results Announcement Year Ended 31 December 2006 On 1 February 2007, Abbey National plc ('Abbey') issued a Trading Statementsummarising the results for the year ended 31 December 2006. That statement wasunaudited and did not comprise a results announcement. It contained narrative onbusiness trends and new business. This preliminary results announcement is a follow-up to the Trading Statementand comprises Abbey's 2006 full year results announcement. It contains auditedprimary financial statements, consisting of a statutory income statement,balance sheet, statement of recognised income and expense, and cash flowstatement. For further details of business trends it should be read inconjunction with the Trading Statement issued on 1 February 2007. Whilst the financial information included in this preliminary resultsannouncement has been calculated in accordance with International FinancialReporting Standards (IFRS), this preliminary results announcement does notcontain all the financial statement disclosures that would be required underIFRS. Abbey's Annual Report and Accounts, including full financial statementsthat comply with IFRS have also been published today. Group Summary Summarised consolidated statutory income statement and selected ratios 31 December 31 December 2006 2005 £m £m Net interest income 1,228 1,172Non-interest income 1,242 1,183Total operating income 2,470 2,355Administrative expenses (1,420) (1,577)Depreciation and amortisation (215) (195)Impairment (losses)/recoveries on loans and advances (344) (218)Provisions for other liabilities and charges (63) (3)Profit/(loss) on continuing operations before tax 428 362Tax on profit/(loss) on continuing operations (115) (108)Profit/(loss) for the year from continuing operations 313 254(Loss) / profit for the year from discontinued operations (245) 166Profit for the year 68 420 Tier 1 capital ratio (%) 8.0% 10.0%Equity Tier 1 capital ratio (%) 5.6% 6.6%Closing risk weighted assets 62,942 55,972 2006 compared to 2005 Profit on continuing operations before tax of £428m increased from £362m in2005. Material movements by line include: • Net interest income of £1,228m compared to £1,172m in 2005 increased by £56m. The increase relates in part to earnings on the proceeds from the sale of the life businesses in 2006. The remaining movement was largely due to higher Retail Banking income driven by growth in retail lending assets and stable retail spreads being offset by the reduction in income from asset financing operations and other businesses, which are being run-down. • Non-interest income of £1,242m compared to £1,183m in 2005 increased by £59m. The increase relates primarily to the uplift in revenues within Financial Markets due to the benefits of favourable market conditions and increased external business. • Administrative expenses of £1,420m (2005: £1,577m) decreased by £157m. The reduction largely reflects the benefits of the cost reduction programme with the majority of the savings relating to employment costs driven by a headcount reduction of approximately 2,000 in 2006 (excluding the reduction reflecting the impact of the sale of the life insurance businesses). In addition, the 2005 administrative expenses included misselling administration costs of £70m. • Depreciation and amortisation of £215m compared to £195m in 2005 increased by £20m due to the timing of asset additions in 2005. • mpairment losses on loans and advances of £344m compared to £218m in 2005 increased by £126m. The growth was partly driven by strengthening of the coverage ratio and in part by the maturing nature of the unsecured personal loan portfolio, including portfolios that are no longer open to new business, with some deterioration in quality. The remaining increase was mainly due to mortgage-related charges increasing modestly from a very low base relative to the overall book. • Provisions for other liabilities and charges of £63m compared to £3m in 2005 increased by £60m due to provisions for misselling remediation payments to customers. (Loss) / profit for the year from discontinued operations of £(245)m (2005:£166m) comprises the profit of the discontinued operations of £19m (2005: £166m)and a loss on sale of £264m. The decrease in profit reflects the sale of thelife insurance business in the third quarter of 2006, together with an increasedlevel of lapses on with-profits bonds in 2006 prior to the sale, and animpairment charge of £69m on intangible assets. The loss on sale principallyreflects the discount to embedded value that is normal in sales of lifeinsurance businesses. Consolidated Income Statement For the years ended 31 December 2006 and 2005 2006 2005 £m £m Interest and similar income 5,644 5,419Interest expense and similar charges (4,416) (4,247)Net interest income 1,228 1,172Fee and commission income 789 751Fee and commission expense (90) (107)Net fee and commission income 699 644Dividend income 1 1Net trading income 408 471Other operating income, net 134 67Total operating income 2,470 2,355Administration expenses (1,420) (1,577)Depreciation and amortisation (215) (195)Total operating expenses (1,635) (1,772)Impairment losses on loans and advances (344) (218)Provisions for other liabilities and charges (63) (3)Profit on continuing operations before tax 428 362Tax on profit on continuing operations (115) (108)Profit for the year from continuing operations 313 254(Loss)/profit for the year from discontinued operations (245) 166Profit/(loss) for the year 68 420Attributable to:Equity holders of the company 68 420 Consolidated Balance Sheet As at 31 December 2006 and 2005 2006 2005 £m £mAssetsCash and balances at central banks 888 991Trading assets 62,314 58,231Derivative financial instruments 8,336 11,855Financial assets designated at fair value 8,713 30,597Loans and advances to banks 2,242 444Loans and advances to customers 103,146 95,467Available for sale securities 23 13Investment in associated undertakings 22 24Intangible assets 90 171Value of in force business - 1,721Property, plant and equipment 415 314Operating lease assets 2,082 2,172Current tax assets 223 235Deferred tax assets 804 796Other assets 2,507 4,003 Total assets 191,805 207,034 LiabilitiesDeposits by banks 6,656 5,617Deposits by customers 66,519 65,889Derivative financial instruments 10,218 11,264Trading liabilities 57,604 52,664Financial liabilities designated at fair value 8,151 7,948Debt securities in issue 28,998 21,276Other borrowed funds 1,655 2,244Subordinated liabilities 5,020 6,205Insurance and reinsurance liabilities - 21,501Macro hedge of interest rate risk 174 13Other liabilities 1,616 3,190Investment contract liabilities - 3,306Provisions 180 253Current tax liabilities 300 288Deferred tax liabilities 564 886Retirement benefit obligations 1,034 1,380 Total liabilities 188,689 203,924 EquityShare capital 148 148Share premium account 1,857 1,857Retained earnings 1,111 1,105 Total shareholders equity 3,116 3,110 Total liabilities and equity 191,805 207,034 Consolidated Statement of Recognised Income and ExpenseFor the years ended 31 December 2006 and 2005 2006 2005 £m £m Exchange differences on translation of foreign operations (9) 3Actuarial gains/(losses) on defined benefit pension plans 219 (154)Gains on available for sale securities 1 -Tax on items taken directly to equity (66) 46Net gain/(loss) recognised directly in equity 145 (105)Profit/(loss) for the year 68 420Total recognised income and expense for the year 213 315Effect of changes in accounting policyIFRS transition adjustments at 1 January 2005:Retained earnings - (293) 213 22Attributable to:Equity holders of the parent 213 22 Consolidated Cash Flow StatementFor the years ended 31 December 2006 and 2005 2006 2005 £m £m Net cash flow used in operating activitiesProfit/(loss) for the year 68 420Adjustments for:Non cash items included in net profit 1,125 273Change in operating assets (10,682) (11,830)Change in operating liabilities (2,341) 3,934Income taxes paid (60) (132)Effects of exchange rate differences (1,196) 80 Net cash flow used in operating activities (13,086) (7,255) Cash flows from/(used in) investing activitiesDividends received from associates 3 3Investment in associates (1) (5)Disposal of subsidiaries, net of cash disposed 244 845Purchase of tangible and intangible fixed assets (230) (329)Proceeds from sale of tangible and intangible fixed assets 5 190Proceeds from sale of investment properties - 1,332Purchase of non-dealing securities (9) (2) Net cash flow from investing activities 12 2,034 Cash flows from/(used in) financing activitiesIssue of loan capital 10,778 4,351Repayment of loan capital (8,813) (2,925)Dividends paid (207) -Net cash flows from financing activities 1,758 1,426Net decrease in cash and cash equivalents (11,316) (3,795)Cash and cash equivalents at beginning of the year 8,241 11,259Effects of exchange rate changes on cash and cash equivalents (772) 777 Cash and cash equivalents at the end of the year (3,847) 8,241 Abbey & Santander Abbey National plc ('Abbey') is a wholly owned subsidiary of Banco SantanderCentral Hispano, S.A. ('Santander') (SAN.MC, STD.N). Founded in 1857, Santanderhas more than 60 million customers, over 10,000 offices and a presence in over40 countries. It is the largest financial group in Spain and is a major playerin Latin America and elsewhere in Europe, including in the United Kingdom(through Abbey) and in Portugal. Through Santander Consumer it also operates aleading consumer finance franchise in Germany, Italy, Spain and ten otherEuropean countries. Santander has a secondary listing of its ordinary shares on the London StockExchange and Abbey continues to have its preference shares listed on the LondonStock Exchange. Nothing in this preliminary results announcement constitutes orshould be construed as constituting a profit forecast. Disclaimer Abbey and Santander both caution that this preliminary results announcement maycontain forward-looking statements. The US Private Securities Litigation ReformAct of 1995 contains a safe harbour for forward-looking statements on which werely in making such statements in documents filed with the US Securities andExchange Commission. Such forward looking statements are found in various placesthroughout this preliminary results announcement. Words such as 'believes', 'anticipates', 'expects', 'intends', 'aims' and 'plans' and similar expressionsare intended to identify forward looking statements, but they are not theexclusive means of identifying such statements. Forward-looking statementsinclude, without limitation, statements concerning our future businessdevelopment and economic performance. These forward looking statements are basedon management's current expectations, estimates and projections and both Abbeyand Santander caution that these statements are not guarantees of futureperformance. We also caution readers that a number of important factors couldcause actual results to differ materially from the plans, objectives,expectations, estimates and intentions expressed in such forward-lookingstatements. These factors include, but are not limited to, (1) inflation,interest rate, exchange rate, market and monetary fluctuations; (2) the effectof, and changes to, regulation and government policy; (3) the effects ofcompetition in the geographic and business areas in which we conduct operations;(4) technological changes; and (5) our success at managing the risks of theforegoing. The foregoing list of important factors is not exhaustive. Whenrelying on forward-looking statements to make decisions with respect to Abbey orSantander, investors and others should carefully consider the foregoing factorsand other uncertainties and events. Such forward-looking statements speak onlyas of the date on which they are made, and we do not undertake any obligation toupdate or revise any of them, whether as a result of new information, futureevents or otherwise. Statements as to historical performance, historical shareprice or financial accretion are not intended to mean that future performance,future share price or future earnings (including earnings per share) for anyperiod will necessarily match or exceed those of any prior year. The financial information set out in this preliminary results announcement doesnot constitute Abbey's statutory accounts for the years ended 31 December 2006or 2005, but is derived from those accounts. Statutory accounts for 2005 havebeen delivered to the Registrar of Companies and those for 2006 will bedelivered in due course. The auditors have reported on those accounts; theirreports were unqualified and did not contain statements under sections 237(2) or(3) Companies Act 1985. Contacts Matthew Young (Communications Director) 020 7756 4232 Anthony Frost (Head of Media Relations) 020 7756 5536 Bruce Rush (Investor Relations) 020 7756 4275 Simon Donovan (Investor Relations) 020 7756 4476 For more information contact: [email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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