RNS Number:4554M
Abbey National PLC
18 June 2003

Ahead of the close period commencing 30th June and a conference call with
analysts at 9:30 this morning, this statement provides a summary of business and
financial trends, based on results for the first 4 months (unless otherwise
stated).

An audio webcast of the analyst conference call will be available by close of
business today at www.abbeynational.com.

At the presentation of the 2002 full year results on 26th February 2003, we
announced our move towards a 'pure-play' focus on UK personal financial services
(PFS), with businesses outside this remit to be managed for value and capital
release in the Portfolio Business Unit (PBU).  The task of re-engineering and
revitalising the PFS operations is a significant one that we expect to
accomplish over the next three years.  Whilst a good start has already been
made, and asset sales in the PBU are running ahead of target, the task ahead
remains considerable.

A full update on the implementation of the new strategy and the detailed
disclosures made with the 2002 full year results will again be provided at the
interim results, and in some key areas supplemented.

Highlights from today's statement:

*       Implementation of the new strategy is progressing to plan.  We are also
on track to deliver gross cost savings in excess of #200 million annualised by
the end of 2005;

*       Two Board level appointments have been made, completing the Executive
Director team;

*       Asset sales from the PBU are running ahead of target, bringing forward
associated risk reduction, capital ratio improvement and loss recognition;

*       PFS trading profit before tax is running circa 10-15% below a
proportionate amount of the pro forma figure given in February for 2002 as a
whole.  This is consistent with guidance previously provided. Certain additional
charges relating, inter alia, to the cost programme are expected as described
herein;

*       With the exception of significantly lower investment sales, PFS new
business flows remain robust, with mortgage lending running at levels well ahead
of the comparable period last year; and

*       PFS credit quality remains very strong.

Portfolio Business Unit

Excellent progress has been made in reducing asset balances in the PBU
portfolios and at a pace ahead of plan.  As at the end of May, asset balances
had been reduced from #60 billion at the year-end to around #33 billion, a
reduction approaching 45%, and equating to a broadly comparable reduction in
risk weighted assets.

Substantial losses on asset sales (charged against income) have been recorded at
levels consistent with "mark-to-market" disclosures at the 2002 full year
results.  New provisioning in the Wholesale Bank is running lower than the first
half of last year. Other charges resulting from cost elimination and business
closures should also be anticipated. A minority of the PBU losses will not be
fully tax deductable.

Given this faster than expected reduction in asset balances to date across the
PBU, there will be a corresponding impact on the overall PBU losses expected in
2003, reflecting the realised cost on sale, and the reduced pre-provisions
income expected from lower asset levels.  Overall, while speed of risk reduction
is improved, the likely range of cost for exiting the PBU has not changed
materially as improved areas are largely offset by declines in other parts.
Until the PBU assets are substantially eliminated, there will inevitably be
uncertainty as to the eventual cost of exit.

Subject to market conditions, we remain confident of a meaningful capital
release from the PBU wind-down.  The extent to which reinvestment in the PFS
business is required will be influenced significantly by Basel II, International
Accounting Standards and related regulatory and accounting changes currently
being developed industry-wide.


Wholesale Bank

Wholesale Bank asset portfolios have been reduced across all credit rating bands
and most sectors, with a substantial reduction in single name risk
concentrations.

In particular, reduction of the debt securities portfolio has been prioritised,
which as at the end of May was over 60% lower than the December closing
position.  Within this category, good progress has been made in reducing the
large portfolio of Collateralised Debt Obligations structured assets, despite
this being a relatively illiquid market.  The most problematic areas have been
in direct and Asset Backed Securities repackaged exposure to airline leases,
which appear more challenged today than at the time of the year-end results, and
to US and UK power project loans.

Details on the remaining unrealised mark-to-market deficit of the debt
securities portfolio and on outstanding exposures across different portfolios
will again be provided at the interim results.

First National

The sale of the consumer and retail finance businesses to GE Capital was
completed in April, reducing assets by #4.8 billion and realising a surplus to
net tangible assets (after costs) of around #200 million.  Goodwill associated
with these businesses was written down in 2002 to a level in line with the
proceeds expected from the transaction, resulting in minimal profit and loss
impact from the sale in 2003.  However, the sale completion does meaningfully
strengthen the cash and capital position of Abbey National.

In May, the decision to close First National Motor Finance to new business, and
wind down the existing book was announced.  Most of this will be accomplished
over the next 2 1/2 years.  Before restructuring costs a modest trading loss is
expected during the run-down.

International Life Businesses and European banking

The Scottish Provident Ireland and Scottish Mutual International life operations
are now effectively closed to new business. Options for accelerating capital
return will be explored during coming months, together with any actuarial
impacts on current embedded value.

Plans in relation to the mortgage businesses in France and Italy are well
underway.

Personal Financial Services - Financial and Business Update

PFS trading profit before tax is running circa 10-15% below a proportionate
amount of the pro forma figure given in February for 2002 as a whole, largely
reflecting reduced operating income.

The reduction in operating income is consistent with issues highlighted in the
full year results and AGM statements. These included the impact of the 2002
embedded value (EV) re-basing and a fall in investment new business.  In
addition, higher interest expense relating to capital hedging, and a further
narrowing of the retail banking spread was flagged - now expected to be at or a
little below 1.60% for the first half (2002 Half 2: 1.75%), impacted by strong
new lending and remortgaging changing the mix of the mortgage book, and putting
pressure on the asset spread, and lower interest rates more generally.

Costs on a trading basis across the PFS business are running at levels below the
second half of last year.  This means that cost savings already in place largely
offset normal cost inflation, as well as additional cost increases such as those
relating to pension fund contributions.

Gross and net mortgage lending is on track to deliver growth of around 40% and
60% respectively on the first half of last year (excluding the impact of the
disposed First National businesses).  This is not at the expense of credit
quality, with lending over 90% of loan to value (LTV) and the overall average
LTV on new business both currently running below 2002 levels.  However,
redemptions are also running at significantly higher levels, impacting net
market share and reducing the proportion of 'free-to-go' standard variable rate
asset.

Credit quality remains strong, with further reductions in 3 month plus arrears
cases.

New business sales in terms of bank account, credit card, and general insurance
remain robust.

As flagged in the AGM statement, investment sales are running substantially
lower than 2002 levels.  This reflects the volatile equity market conditions and
associated investor confidence, and our withdrawal from the manufacture of
with-profits products, currently only marginally offset by sales of the
Prudential Bond through the branch network.  Excluding the with-profit product,
annualised premium equivalents of sales to the end of May are running circa 25%
lower than the same period in 2002, with reduced pension and investment sales at
lower margins partly offset by strong protection sales despite pricing
turbulence and reinsurance margin pressures in this segment.

Substantial internal work is underway to make major front-to-back changes to the
investment product range and their sales channels, and to achieve improved
alignment of Abbey National's broad competencies in this area.  As fundamental
change works through the whole industry, we are focusing hard on positioning
Abbey National well for the future in these areas.

The ongoing Treasury Services businesses are performing well in aggregate.

Excluded from the trading profit guidance above are a number of additional
charges that will be made.  These, inter alia, will reflect investment variances
in the life funds (dependent on market levels and review of actuarial
assumptions) and current period restructuring / cost programme expenses.
Certain adjustments relating to previously capitalised project costs and the
Scottish Provident contingent loan are being evaluated.

Personal Financial Services - Strategic Update

The re-engineering and revitalisation of the PFS businesses represents a
significant strategic and organisational change, and is expected to take 3 years
to implement.  At the full year results announcement, priorities for 2003 were
highlighted, against which good progress can be reported:

*       The new organisational structure representing a fundamental change to a
'one company' functional model is now fully operational;

*       A substantial reorganisation of our customer-facing branch staff has
been effected, which will be integral to the new service and advice model that
is being tested.  This includes plans to increase customer facing staffing
levels by around 450 full time equivalents which are being implemented;

*       New Customer Relationship Management software (One on One) is in the
initial roll-out stage, aimed at improving the customer experience and our
ability to identify and meet their needs;

*       Significant projects are underway to upgrade telecoms and IT systems
capabilities across the branch network; again, an enabler to expanding customer
business;

*       Initial closures and consolidation of operational sites are in progress,
including the Manchester and Didsbury operations, and transfer of Inscape
operations from Billericay to Glasgow;

*       Cost savings are on track to exceed #200 million (gross) of annualised
savings at the end of 2005 as targeted;

*       Two new Board level positions have been created and subsequently filled
with external appointments, Angus Porter will join as Customer Propositions
Director in July and Priscilla Vacassin joined as Human Resources Director in
June; and

*       Substantive work is ongoing, with important new initiatives expected to
be unveiled in the second half of the year focusing on driving customer activity
forward.

A more comprehensive update will be provided at the interim results.




Luqman Arnold, Group CEO, said:

"Our new strategy was presented with the 2002 results announcement in February
of this year.  I am pleased to note that our actions to deliver that strategy
are on track overall and even ahead of schedule in the PBU.  We are clear that
huge challenges remain, with root and branch change required to deliver the
Abbey National of which customers, staff and shareholders can be proud.  There
are no short cuts to this work and 2003 is very much about putting in place the
foundations and establishing clarity on the financial start point.
Nevertheless, work is continuing apace and the impact of changes will become
more visible by the time the 2003 full year results are presented."

Future diary dates:

2003 Interim Results                                    30th July 2003
2003 Full Year Preliminary Results Announcement         26th February 2004

Contacts

Thomas Coops         (Director of Communications)       020 7756 5536
Jon Burgess          (Head of Investor Relations)       020 7756 4182
Christina Mills      (Head of Media Relations)          020 7756 4212
Matt Young           (Media Relations)                  020 7756 4232

For more information contact:    investor@abbeynational.co.uk

Forward Looking Statement:

This document contains certain "forward-looking statements" with respect to
certain of Abbey National's plans and its current goals and expectations
relating to its future financial condition, performance and results.  By their
nature, all forward-looking statements involve risk and uncertainty because they
relate to future events and circumstances which are beyond Abbey National's
control including among other things, UK domestic and global economic and
business conditions, market related risks such as fluctuations in interest rates
and exchange rates, the policies and actions of regulatory authorities, the
impact of competition, inflation, deflation, the timing, impact and other
uncertainties of future acquisitions or combinations within relevant industries,
as well as the impact of tax and other legislation and other regulations in the
jurisdictions in which Abbey National and its affiliates operate.  As a result,
Abbey National's actual future financial condition, performance and results may
differ materially from the plans, goals, and expectations set forth in Abbey
National's forward-looking statements.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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