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The market
The benchmark FT-SE 100 Index rose 46.4 points on Friday , or 0.7 per cent, to 6363.5 points. The index rose for the first week in four, advancing 0.4 per cent. Three stocks gained for every two that declined in the FT-SE All Share Index, which advanced 20.88 points, or 0.7 per cent, to 3058.06. Scotia, the biotech company, has many attributes that investors with an appetite for risk like to see in a drug company. One of its drugs undergoing trials addresses unmet medical needs. The drug is the first of what may prove to be a new breed of cancer drugs making use of photodynamic therapy. Foscan is injected into patients and is let to circulate for a few days. Then a laser is shone onto the tumour, which in the presence of oxygen causes the drug to release a strong tumour-killing chemical. However, opinions on Foscan vary widely. Foscan was developed for neck and head tumours but if it works for pancreatic and prostate cancers - phase II trails are already underway - the drug could generate as much as £350 million a year.
Another biotech making the news is CeNeS. It has developed Moraxen, a pain-relief suppository. This formulation of morphine gets around the problem of relieving cancer pain for people who cannot take the drug orally.
Barclays
Barclays, reported that its retail financial services profit for the half year to 30 June improved by over 30 per cent to £822 million reflecting good performances in consumer lending, mortgages and savings. Barclaycard's profit was flat at £195 million with an 11 per cent increase in revenues to £523 million partly offset by increased strategic investment spending in developing information management capabilities, international expansion and e-commerce initiatives. Barclays' Corporate Banking arm recorded an 18 per cent rise in profit to £541 million.
Barclays claimed that it continued to develop the quality of its customer proposition in the United Kingdom. Its improved customer service approach to the UK middle market is generating record satisfaction levels with customers and helping the group win new customers and improve product penetration in an increasingly competitive market. Meanwhile, Barclays Capital increased profits by 25 per cent to £218 million, with both the Rates and Credit Businesses performing well. Barclays Capital's unique debt-focused approach and global model is gaining new and repeat business from clients in the United Kingdom, United States, Asia and the rest of Europe. As European credit markets expand Barclays will benefit from a leading market position in loans and bonds.
Barclays Global Investors (BGI) was also another chapter in a success story as profits increased by 18 per cent to £33 million, reflecting strong new business volumes in the core United States and United Kingdom businesses offset by continuing investment in key strategic initiatives, including exchange traded funds.
Technology will play an important part in Barclays' plans as it is bringing new customer applications to market at scale. Barclays' small business joint venture with Freeserve provides a broad range of on-line information and services to UK small businesses. In addition, Barclays B2B.com will provide a direct channel for the sale and delivery of business services. In the future, technology will enable the banking group to provide much wider functionality and information plus the capability to deliver their services over mobile devices and interactive TV. WAP-enabled mobile phone services will be operational for both Barclaycard and Stockbrokers by the end of the year.
Alliance & Leicester
Alliance & Leicester reported pre-tax profits of £251.6 million for the six months to 30 June. The former building society has completed a comprehensive strategic review, and it is implementing a fundamental internal reorganisation. Furthermore, it is carrying out a review of the cost structure throughout the group. It is expected to report the findings of this review to the market in Autumn 2000. The banking group is seeking to identify a strategic partner to facilitate the simplification of processes and the delivery of a new group-wide IT systems architecture - new technology which will deliver customer service benefits, an improved cost base and faster time-to-market for new products.
Alliance & Leicester's aim is to 'Web-enable' the whole bank, providing integrated customer access and improving the delivery of information to all points of customer contact. The group is working with Compaq and Prologic to launch an internet bank in the 4th quarter of 2000. This will be the first implementation of the group's new systems architecture, using the same middleware and customer relationship management components as will be used across the Group. Alliance & Leicester is also launching business banking initiatives, in particular it is substantially targeting a share of the small and medium-sized business banking market under the "Alliance Business Banking" brand. Furthermore it is seeking to launch retail banking initiatives, including building its business in unsecured consumer credit markets. Alliance & Leicester is significantly increasing the size of its ATM network, to attract transactions and provide a service to its customers. During the first half of 2000 the group's ATM network increased from 687 to 740 machines, and it plans to install several hundred further machines over the next year. The majority of the group's Retail Banking products can already be accessed on-line, and it will continue to increase this access. The initial targets for the year were for one million visits and 40,000 product applications. On the commercial banking side Alliance & Leicester is continuing, in partnership with the Post Office, to develop the provision of cash to other financial institutions in the UK. Together they are in the process of building two new cash centres in partnership with two other banks.
Alliance & Leicester is making good progress in attracting corporate customers to its unique internet bill payments service, BillPay. The service was launched in February 2000, and 22 corporate customers are on-line. It plans to have signed up around 64 corporate customers by the end of the year. Additionally, Alliance & Leicester is working with the Association for Payment Clearing Services (APACS) on the development of its Electronic Bill Presentation and Payment (EBPP) system, and it is looking forward to providing this service to customers in the future. For Small and Medium-Sized Businesses the banking group is piloting "Netshop Solutions", a service enabling small businesses to build their own website to sell their products over the internet. Alliance & Leicester is planning for significant growth in its share of the small and medium- sized business banking market.
On the down side the company reported a fall in Mortgage Lending & Investments' income which was due primarily to lower mortgage-related insurance earnings. The Personal Banking income remained stable with lower creditor protection insurance income offset by higher current account transaction fees. The slight fall in Commercial Banking non-interest income is due to an increasing proportion of bill payments made by electronic means and lower volumes for winter fuel state benefit payments, offset to an extent by higher merchant acquiring volumes. In addition to the £35 million of residential provisions held on balance sheet, the group has an offshore captive insurance subsidiary with available funds totalling £43 million. Net lending to customers was £328 million increasing balances to £24.1 billion. Gross residential mortgage lending was £1.4 billion (June 1999: £2.1 billion) which represents an estimated market share of 2.5 per cent (June 1999: 4.2 per cent). Redemptions and capital repayments represent an estimated market share of 3.7 per cent (June 1999:4 per cent). Fixed rate mortgage lending represented 28 per cent of gross advances for the period compared to 17 per cent in the period to June 1999. Of the total residential mortgages, 74 per cent is covered by redemption penalties at the end of June 2000. Alliance & Leicester's strategy for the future is based on building a radically more efficient and customer-focused organisation. It has taken the first steps to achieve this by restructuring the group to enable significant cost and efficiency improvements to be achieved.
LlOYDS TSB
Lloyds TSB announced that asset quality has improved and it maintained its strong position in all core markets. Statutory results for the first half of 2000 were good, with an 8 per cent growth in income. Customer lending was up 8 per cent and customer deposits up by three per cent. The financial services sector in the UK, is at a watershed created by a rapid change in technology, a dramatic increase in competition, and the increasing requirements of consumers. Lloyds chairman argued that the group's governing objective to maximise shareholder value remains unchanged. He added that Lloyds needs to grow quality income and continue to reduce unit costs. As a result the banking group is focusing on three key areas. First, the further development and implementation of a segmented, relationship driven, approach to customers. Second, developing and implementing an improved wealth management strategy. Third, maximising the competitive advantage of its brand and distribution capability, including e-commerce. The company has increased the number of customers in its higher value personal choice portfolio to over 650,000, with a further 200,000 increase planned for the second half. It is experiencing success with the segmentation of non- personal businesses. In terms of Customer Relationship Management (CRM), it has been further developing this vital component of its future income growth strategy. Lloyds TSB is already piloting an enhanced model of CRM which has increased the volume and quality of leads, and demonstrated a greater awareness of individual customer needs.
Segmentation also features strongly in Lloyds TSB new wealth management strategy which represents a significant revenue growth opportunity for the banking group. It is currently make some £300 million per annum pre-tax profit from wealth management and believes that this contribution can be doubled within four years.
Distribution over the internet will generate additional revenue in the important business to business market, and it is engaged in a number of areas of trade facilitation. Overall distribution capability will be much improved within the next 12 months as Lloyds completes its IT integration as planned, giving the group online real time technology for banking customers, a facility offered by no other bank of their size, and a facility which will become increasingly important in the internet world. Lloyds TSB is confident of achieving major efficiency improvements by applying internet and intranet technology throughout its own business.
Please note that the value of investments, and income (if any) yielded by them, may fall as well as rise, and you may not recover the full amount of your original investment. Past performance is not necessarily a guide to the future.
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