The major business divisions of the Halifax Group

Retail operations represents 95% of the group secured residential lending that comprises the group’s mortgages, liquid savings and retail banking business. The profit before tax for the year ending 2000 ( 1332m) was up by 5% compared to 1999 figures. The mortgages and savings dipped slightly and off set by an increase in the commission and fee costs. Its operating expenses dropped by 5m due to tight control. The reduced charge for residential lending shown improvements in asset quality and performance in retail banking.

This led to a fall of 39m in the provisions for losses. Mortgage sales were up14% to 19bn and the net lending in 2000 more than doubled to  3. 5bn. The operations mortgage pipeline of 2. 9bn at the end of 2000 will drive growth in the first quarter of 2001. The mortgage strategy was to retain existing customers and reduce the disparity between old and new mortgage pricing. The market share for First time Buyer increased to 13. 2% from 9%. Liquid savings balance improved by 0. 4bn to  80. 6bn representing a 13% market share.

The newer products and the policy of inviting customers to savings reviews attributed a stronger performance of flows of funds. The retail banking has seen over 440000 new bank accounts opened with 200000 current accounts. New accounts through Internet banking were higher than expected with 144000 opened. The cardcash product with automated telephone and online banking facilities and the option of a chequebook and easier withdrawals resulted in 240000 accounts. In total over 4 million accounts has been opened giving a market share of 5.7%.

Card services increased due to the acquisition of Bank One International that saw the total cardholders go up to 1. 4m. The acquisition allowed the introduction of the gold and platinum card to customers. A new pricing strategy saw Halifax offering better terms than its high street bank rivals. Halifax’s consumer finance includes secured (up 50%) and unsecured loans (up 19%) both of which increased compared to 1999. Halifax launched a new financial service called Paramount Bank which offered low cost loans and credit cards.

The insurance sector such as home, car, holiday insurance also increased to 242m reflecting the introduction of innovative products and growth in policy numbers. There has been a significant increased of 65% to  320m in the long term savings and protection. It was attributed by the three businesses that Halifax had owned. Clerical Medical offered IFA and rose up by 15%. The personal pensions and groups pensions also increased. Its international operations are being rationalised in order to provide a stronger focus on European markets.

Halifax’s “Direct Offer” provider CAT marked equity ISAs and had the second best selling ISA fund with its Tracker fund. The St. James’s Place Capital plc, 60% owned by the Halifax group saw an impressive increase of 124% in new unit trust and ISA business. (Halifax’ s annual report) Halifax treasury function supports the group by managing liquidity, providing whole sale funding and managing the market risks. The expansion of its foreign exchange and trading book activity in 2000 and the diversification of activities into non-sterling currencies like the Euro has started.

In terms of raising capital for the Halifax Group the quality of the portfolio is assured. The Halifax’s structured finance, consists of Asset Finance, Project Finance, Commercial Property finance and Housing Finance which all provide financing facilities to the wholesale markets. It provided operating lease facilities for a train operator and other projects during the 2000. Halifax Share Dealing Limited (HSDL) allowed customers to purchase and sell shares, unit trusts, investment trusts, gilts, and warrants through its Leeds base centre and Halifax online.

HSDL achieved a 23% increase in online trading volumes. “HSDL is the third largest online broker in the UK” (Compeer) The performance of Halifax is very good for the year ending 2000. The results are shown below. I have also included in the report of how Halifax compared to its competitors (see appendix 1). Overall Halifax does make fewer profits to its rivals but improved upon its 1999 figures. It just shows how demand for financial services has increased during the last decade making financial intermediaries profitable.