HBOS: a good bank for hard times

Over the past few years, HBOS has been one of the most aggressive banks on the UK high street, says Lex in the FT. But today it "is among the most cautious", having switched its focus from growing assets to protecting returns.

This shift should be no surprise, given the "deceleration of the UK economy", but what is a surprise is that HBOS is shifting gears "without, apparently, losing earnings momentum".

Indeed, says Robert Cole in The Times, and Britain's top mortgage bank pleased everyone with its pre-results statement this week. Profits are buoyant, there is to be a further £750m share buyback and the bank also "earned praise" for its plan to make good the £1.8bn deficit on its final salarypension schemes.

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The group's good performance is down to several factors. HBOS has controlled costs well, but kept fee income from insurance and investment sales rising strongly too. It has also been more selective about who it lends to, says Lex, something that has helped keep revenues stable.

HBOS expects the UK economy to pick up speed again in the next 12 to 18 months, but in the meantime earnings per share admittedly helped by the ongoing buy backs should grow a solid 10% this year and next. This all makes HBOS "a good bank to own during potentially bad times".