HBOS takes £1.1bn credit crunch hit

Halifax Bank of Scotland has taken a £1.1 billion hit from the credit crunch, halving underlying interim pre-tax profits.

The owner of the UK's biggest home lender - Halifax - made profits in the first six months of the year of £1.45 billion compared to £2.96 billion last year, a drop of 51 per cent.

Underlying pre-tax profits at HBOS's retail banking arm dropped 5 per cent to £992 million.

The banking giant also said it suffered a 36 per cent leap in bad debts to £1.31 billion in the first half as hard-pressed customers struggled with repayments.

HBOS, which raised £4 billion from a rights issue earlier this month to rebuild its capital, said it would consider "selective asset disposals to improve out deposit to loan ratio," but did not provide further details.

Chief Executive Andy Hornby said: "We will look at all sensible options to over time improve deposit-to-loan ratios.

"That's about running down some assets and if some buyers consider assets are worth more to them than they are to us then we don't rule that out."

Shares jumped 5.4 per cent to 285.5p on the news, as analysts said there were no nasty shocks in the results, profits beat expectations and the shares had already been hit hard.

HBOS said its share of net new mortgage lending fell from 22 per cent at the end of December to 7 per cent after it pledged to put margins before volumes.

It said arrears levels - for borrowers three months or more behind with mortgage repayments - rose to 1.95 per cent from 1.67 per cent at the end of last year.

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