Bloomberg News
LONDON - Now that it has repelled a takeover bid by Lloyds TSB Group PLC, Abbey National PLC is hunting for companies in the United Kingdom as it tries to catch its bigger rivals.
Though Britain's second-largest mortgage lender has been trying to boost income from businesses other than home lending, which is becoming less profitable as banking companies slash prices, Ian Harley, chief executive officer of Abbey National, says it will not rule out buying a rival mortgage lender.
Abbey's priorities are life insurance, asset management, and corporate banking, he said in a conference call. "There's still a lot to go for in terms of U.K. consolidation. If we can advance those [businesses] more quickly through mergers and acquisitions, we will."
Analysts say Alliance & Leicester PLC and Bradford & Bingley PLC are both potential targets for Abbey National. Each is shielded from hostile takeover by terms of its conversion from customer-owned status, though Alliance & Leicester loses that protection next year. Bradford & Bingley is immune through 2005.
Mr. Harley said his company would issue shares if need be to finance a deal, but no specific target is currently "filling our horizon."
Alan Harris, a fund manager at Charles Stanley & Co., said some investors are concerned that Abbey National may overpay for any purchase. "Investors are thinking they are going to use cash, or issue paper, which would dilute the shares."
Abbey National's shares fell 9.9% Wednesday - the biggest percentage decline since the lender became a publicly traded company in 1989 - after it reported that its first-half earnings growth was short of some analysts' forecasts and that its loan-loss provision was larger than analysts had expected.
Mr. Harley said he is also trying to boost the percentage of income that comes from outside the United Kingdom by 10 percentage points, to 25%. The company plans to expand its non-British insurance business through Scottish Provident Institution, which it bought last year.
Abbey National also has businesses in Hong Kong and the Middle East, and it is in talks to expand its Internet banking operations into Italy, Mr. Harley said. "We're talking to interested parties, so watch this space," he said.
The company's wholesale banking division, under the direction of Gareth Jones, plans to open an office this year in Stamford, Conn.
