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Wednesday 08th of October 2008
February 28, 2007

HBOS blames cut in charges for slower growth


by Elaine Frei

HBOS blames cut in charges for slower growth

HBOS (LSE: HBOS) has announced that its income will fall by £60 million this year because it is having to cut default chargers on credit cards. The cut comes after an Office of Fair Trading ruling which directed banks and credit card companies to cut their average fees for missing payments to £12, half of what most fees had been.

The bank also said that sales of repayment insurance, meant to help those who cannot pay their bills due to unemployment or illness, dropped to £948 million last year, a decrease of 10 percent. It cited these two reasons for a slowdown in growth in earnings from “non-interest” sources. Last year, HBOS had a total income of £12 billion, of which £5.7 billion was profit.

The decline in sales of payment protection policies could be put to the description of such policies as a “protection racket” by consumer groups, but is likely to be exacerbated by inquiries into the policies by the Competition Commission and the Financial Services Authority. However, with curbs on how much banks charge for missed credit card payments and with new investigations into payment protection insurance sales activities, most analysts believe it is likely that banks will begin charging annual fees on credit cards and on bank accounts in order to make up the shortfall of income from lowered fees and sales.

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