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UK's Abbey sinks to first loss
LONDON, England (Reuters) -- Britain's second biggest mortgage lender Abbey National Plc plummeted on Wednesday to its first loss, slashed its dividend in half and said it would take a knife to costs. Pre-tax losses for the year ending 2002 stood at 984 million pounds ($1.55 billion), down from a year ago profit of 1.47 billion pounds. Earnings were hit by rising bad debts from an ill-fated move into corporate banking. Analysts had forecast losses ranging from 42 million pounds to 1.5 billion pounds with a consensus forecast of a loss of 648 million pounds. Abbey, which has warned of possible job cuts, said it aimed to cut more than 200 million pounds in costs from its core retail bank business.
The woes of Abbey, whose roots date back to 1849, have stood in stark contrast to that of rival UK mortgage lenders like market leader HBOS Plc, which have banked higher profits on the back of Britain's booming housing market. Abbey's venture into corporate banking - charging high interest rates to companies with low credit ratings - reaped rewards during the late 1990s boom, but the strategy turned sour as the bear market set in and bad debts soared. This led to the removal last year of chief executive Ian Harley, who has been replaced by Luqman Arnold, a former executive at Swiss bank UBS AG. The group's financial woes tempted a bid approach last year by Bank of Ireland, which failed. Abbey also shook off a hostile bid by UK rival Lloyds TSB in 2001. In the first set of results since Arnold took over, Abbey also announced a 50 percent cut in its full year dividend to 25 pence and added future payout policy would be uncertain until it completed its restructuring. Abbey shares closed down five percent at 373 pence on Tuesday.
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