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Big losses prompt Abbey Nat to split businesses

Abbey National is refocusing after its recent expansion programme to concentrate on its retail banking and onshore IFA businesses after describing its results for last year as “extremely unsatisfactory”.

The company lost £984m last year after a profit of£1.47bn in 2001. As a result, Abbey is splitting its operation into two – personal financial services taking in high-street banking and its intermediary operations.

Its other businesses, including Scottish Mutual International and Scottish Provident International, and corporate finance business are placed in the portfolio business unit where they will be “managed for value and exit”.

The new strategy is the result of a review carried out by new chief executive Luqman Arnold, who replaced Ian Harley last July.

The losses reflect £866m pumped into its life company subsidiaries over the last year and provisions for £902m in bad debt in its wholesale banking division. Protection business from its Scottish Provident sudsidiary helped relieve some of the gloom with a 47 per cent increase in new business.

Abbey says it has reduced the equity backing ratio of the now closed with-profits funds of Scottish Mutual, Scottish Provident and Abbey National Life to 25 per cent.

It has also bought derivatives to protect the fund from further stockmarket volatility.

Abbey National for Intermediaries sales and marketing director Ambrose McGinn says: “Abbey National for Intermediaries remains focused on IFAs and is a significant element of our business – it is business as usual.”

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