HBOS pre-tax profits plunge over 70%

The credit crisis and weakening economy has led to HBOS posting a huge slump in profits.

HBOS said pre-tax profit fell from £2.99 billion in the first half of 2007 to £848 million compared with the same period a year ago. Bad debts increased 36% to £1.31 billion as customers defaulted on loans.

Furthermore, HBOS said its underlying profits before tax, including some accounting adjustments, were down 51% to £1.45 billion during the first half of this year.

In May, HBOS revealed that it had suffered write-downs of £1.03 billion this year on investments linked to America’s sub-prime mortgage market

However, despite the results, shares in the bank gained almost 8% in early trading today.

The fall in profits follows that from High Street bank, Lloyds TSB, who said profit fell 70% after it wrote down £585 million.

However, HBOS said it was well positioned to operate in the more challenging economic environment. It recently carried out a £4 billion share sale, of which only 8.29% of shareholders signed up to.

Underwriters Dresdner Kleinwort and Morgan Stanley, were left with £3.6 billion in unsold shares to offload to new and existing shareholders.

It was also revealed this week that HBOS, which was created by the merger of Halifax and Bank of Scotland, had been knocked off the number one spot as Britain’s biggest mortgage company.

Abbey, which is owned by Spanish bank Santander, announced that it gained over 25% of all new mortgages sold in the first half of 2008 - up from its previous share of only 10%, allowing it to achieve the number one spot held by HBOS.

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