Profits for the first 6 months of 2005 were £9.1m compared with £6.0m for the first six months of the previous period. Gross lending at £1.4bn (2004 £2.1bn) reflects the slowdown in the housing market during the first half of the year, resulting in mortgages under management of £10.3bn.
Commenting on the results, Anne Gunther, Chief Executive, said:
"I am delighted to announce Standard Life Bank's profitable start to 2005. The Bank has continued to grow profits, revealing a maturing business capable of business performance over the cycle".
UK house prices were static in the first half of 2005 and although Standard life Bank have not and do not expect to see evidence of widespread house price falls, the lending market was weaker than 2004. As mortgage affordability remains strong and remortgaging activity continues, Standard life Bank expect the mortgage market to
settle down to sustainable levels.
Overall business quality remains very high, with mortgages three or more months in arrears standing at 0.18% on 30 June, well below the industry average, reflecting the sophisticated underwriting approach taken by the Bank.
The indexed loan to value ratio of the mortgage book (the proportion that the outstanding mortgage balance represents of what a property is worth in the current market) is 44.5%. The buy to let mortgage book has expanded and comprised 4.5% of total mortgages under management at 30 June, compared
to 3.4% at the same point last year. For the industry as a whole, buy to let accounts for 7% of lending. The quality of the buy to let book remains excellent, and is even better than the exceptionally high quality residential book.
Standard Life Bank understands that loyalty in the mortgage marketplace starts with the lender. Anne Gunther further commented: "We are focussed on retaining our customers and this means engaging with them throughout the lifespan of the mortgage. Our flexible mortgage, Freestyle, forms the centrepiece of our customer offering with a majority
using our flexible product features to borrow additional funds at low mortgage rates, or overpay to reduce lifetime mortgage costs. The latest addition to the Freestyle family, Freestyle Rate Reducer, was launched in July, building in pay rates which step down over time, giving even better value to our most loyal customers."
The opportunities from Standard Life having a bank at its core continue to be realised. The Bank's retail funding has benefited from the launch, late last year, of the Standard Life UK Life & Pensions' SIPP product where the Bank takes in the cash deposits. The Bank is now working closely with UK
Life & Pensions to build the residential property and mortgage capability that will be required within the SIPP for pension simplification - "A Day".
Funding of the Bank's mortgage book continues to be well diversified through a mix of retail savings, the wholesale markets and securitisation. Standard Life Bank continues to expand on its highly successful securitisation programme which has so far attracted £5bn of investment with the record
pricing in the market at the time for the fourth Lothian deal, reflecting the high quality of the underlying collateral. In June 2005, as a result of the impact of the Financial Groups Directive, the Bank successfully re-financed the Tier 2 Subordinated Debt, originally provided by Standard Life Assurance Company. This £265m transaction was several times over subscribed and well received by the market. It again evidences the growing
maturity of Standard Life Bank and is the first time that stand-alone Tier 2 capital has been raised, by the Bank.
