LONDON, July 31 – British bank HBOS said on Thursday that net profits tumbled 56 percent in the first half of the year due to a sharp rise in credit-crunch write-downs and bad consumer debts that cannot be repaid.
HBOS, one of Britain\’s biggest home loan providers, also predicted further write-offs linked to ongoing world markets turmoil, and gave a gloomy outlook for the country\’s slumping property market and slowing economy.
Net profits sank to 931 million pounds (1.18 billion euros, 1.84 billion dollars) in the six months to the end of June, compared with 2.114 billion pounds in the same period of 2007, HBOS said in a results statement.
Pre-tax profits plunged by almost 72 percent to 848 million pounds, compared with 2.997 billion pounds previously.
HBOS said it suffered 1.1 billion pounds of write-downs linked to strains from the ongoing global squeeze on credit. That was marginally higher than the 1.03 billion pounds given at the end of May.
Bad debts — or consumer loans which have been written off — jumped to 1.31 billion pounds during the first half. Group income was stable at 6.467 billion pounds.
"In light of the deteriorating economic environment, we expect to see upward pressure on impairment losses," HBOS said in a statement. "Mortgage arrears are on a rising trend from historic lows but are supported by strong employment."
It added: "The reduced availability of credit and a slowing housing market are now part of a wider economic slowdown.
"We expect UK GDP (gross domestic product) growth to remain positive in 2008 but with a risk to the downside in 2009."
HBOS also said its recent 4.0-billion-pounds rights issue was completed and would strengthen its capital base amid the global credit crunch which erupted on world markets in August last year.
"The first half of 2008 has seen the dislocation in financial markets evolve into a wider economic slowdown," said chief executive Andy Hornby in the earnings release.
"Recognising the importance of strong capital … we have now completed our 4.0-billion-pounds rights issue, rebasing the group to stronger capital ratios.
He added: "The group is now well positioned to operate in the more challenging economic environment."
Earlier this month, HBOS had failed to raise all of the cash from shareholders to boost its finances, forcing the underwriting banks to step in.