Interim Results - Part 2

WOOLWICH PLC
29 July 1999


PART 2

1.   SUMMARISED PROFIT AND LOSS ACCOUNT

                                          Half Year to 30 June     Year to 31 
                                                                     December
                                           1999           1998           1998
                                             £m             £m             £m
Net interest income                       329.3          319.4          659.0

Non-interest income                       133.3          113.5          266.7

Operating income                          462.6          432.9          925.7

Operating expenses                       (198.6)        (185.3)        (395.7)

Provisions for bad and doubtful debts     (13.7)          (7.2)         (12.9)

Provision for pensions review               -              -            (12.0)

Headline profit before tax                250.3          240.4          505.1

Loss on disposal of Group operations        -              -             (9.2)

Profit on ordinary activities before tax  250.3          240.4          495.9

Tax on profit on ordinary activities      (79.5)         (78.6)        (164.6)

Profit on ordinary activities after tax   170.8          161.8          331.3

Minority interests - equity                (1.3)          (1.2)          (3.1)

Profit attributable to the
shareholders of Woolwich plc              169.5          160.6          328.2

Dividends                                 (60.7)         (56.2)        (403.1)

Profit/(deficit) for the period           108.8          104.4          (74.9)

Dividends per ordinary share:
Interim                                     3.9p           3.5p           3.5p
Final                                         -              -            7.1p
Special                                       -              -           15.0p


2.   SEGMENTAL PROFIT AND LOSS ACCOUNT

For the half year ended 30 June 1999

                                    UK  Continental
                                Retail       Europe  Treasury  Capital  Total
                                    £m           £m        £m       £m     £m
Net interest income              226.9         19.5      21.5     61.4  329.3
Non-interest income              130.0          2.6       0.7      -    133.3
Total income                     356.9         22.1      22.2     61.4  462.6
Operating expenses              (180.4)       (15.2)     (3.0)     -   (198.6)
Provisions for bad and
 doubtful debts                  (12.2)        (1.5)      -        -    (13.7)
Provision for pensions review      -            -         -        -      -
Operational profit               164.3          5.4      19.2     61.4  250.3
Income from capital               38.1          1.3       2.4    (41.8)   -
Headline profit before tax       202.4          6.7      21.6     19.6  250.3


For the half year ended 30 June 1998

                                    UK  Continental
                                Retail       Europe  Treasury  Capital  Total
                                    £m           £m        £m       £m     £m
Net interest income              217.9         17.6      12.0     71.9  319.4
Non-interest income              113.5          0.5      (0.5)     -    113.5
Total income                     331.4         18.1      11.5     71.9  432.9
Operating expenses              (170.6)       (12.4)     (2.3)     -   (185.3)
Provisions for bad and
 doubtful debts                   (7.0)        (0.2)      -        -     (7.2)
Provision for pensions review      -            -         -        -      -
Operational profit               153.8          5.5       9.2     71.9  240.4
Income from capital               33.9          2.0       2.1    (38.0)   -
Headline profit before tax       187.7          7.5      11.3     33.9  240.4 
 
 
For the year ended 31 December 1998

                                    UK  Continental
                                Retail       Europe  Treasury  Capital  Total
                                    £m           £m        £m       £m     £m
Net interest income              454.6         35.0      27.7    141.7  659.0
Non-interest income              266.3          1.0      (0.6)     -    266.7
Total income                     720.9         36.0      27.1    141.7  925.7
Operating expenses              (364.0)       (26.6)     (5.1)     -   (395.7)
Provisions for bad and
 doubtful debts                  (13.3)         0.4       -        -    (12.9)
Provision for pensions review    (12.0)         -         -        -    (12.0)
Operational profit               331.6          9.8      22.0    141.7  505.1
Income from capital               70.1          4.2       4.6    (78.9)   -
Headline profit before tax       401.7         14.0      26.6     62.8  505.1

Note: Income from capital comprises notional and actual interest earnings on
equity capital.  Within Woolwich plc capital is allocated to UK Retail and
Treasury on the basis of risk weighted assets and a Tier 1 ratio of 7%. 


3.PROFIT BEFORE TAX AND INTEREST ON CAPITAL
                                         Half Year ended 30 June   Year ended
                                                                  31 December
                                              1999          1998         1998
                                                £m            £m           £m

Headline profit before tax                   250.3         240.4        505.1
Deduct: interest earnings on capital         (61.4)        (71.9)      (141.7)

Profit before tax and interest on capital    188.9         168.5        363.4

                   
4.   NET INTEREST INCOME

a)   Group Net Interest Margin
                                          Half Year ended 30 June  Year ended 
                                                                  31 December
                                               1999          1998        1998
                                                 £m            £m          £m
Interest receivable                         1,067.8       1,183.1     2,457.9
Interest payable                             (738.5)       (863.7)   (1,798.9)
Net interest income                           329.3         319.4       659.0

Average interest earning assets            31,577.1      30,475.0    30,632.8
Average interest bearing liabilities       29,611.1      28,177.1    28,340.1

Gross yield on interest earning assets        6.82%         7.83%       8.02%

Cost of interest bearing liabilities          5.03%         6.18%       6.35%
Net interest spread                           1.79%         1.65%       1.67%
Net interest margin on average interest
 earning assets                               2.10%         2.11%       2.15%
Net interest margin on total assets           2.00%         2.02%       2.02%


b)   Segmental Analysis

For the half year ended 30 June 1999

                                    UK  Continental
                                Retail       Europe  Treasury  Capital  Total
                                    £m           £m        £m       £m     £m
Operating interest income        226.9         19.5      21.5     61.4  329.3
Interest income from capital      38.1          1.3       2.4    (41.8)   -
Total interest income            265.0         20.8      23.9     19.6  329.3

Average interest earning assets 25,479        2,064     9,552          31,577
Customer spread %                 2.08         1.87                      2.06
Net interest margin %             2.10         2.03      0.50            2.10


For the half year ended 30 June 1998

                                    UK  Continental
                                Retail       Europe  Treasury  Capital  Total
                                    £m           £m        £m       £m     £m
Operating interest income        217.9         17.6      12.0     71.9  319.4
Interest income from capital      33.9          2.0       2.1    (38.0)   -
Total interest income            251.8         19.6      14.1     33.9  319.4

Average interest earning assets 23,912        1,639     7,896          30,475
Customer spread %                 2.08         2.08                      2.08
Net interest margin %             2.12         2.35      0.36            2.11


For the year ended 31 December 1998

                                   UK  Continental
                                Retail       Europe  Treasury  Capital  Total
                                    £m           £m        £m       £m     £m
Operating interest income        454.6         35.0      27.7    141.7  659.0
Interest income from capital      70.1          4.2       4.6    (78.9)   -
Total interest income            524.7         39.2      32.3     62.8  659.0

Average interest earning assets 24,281        1,771     8,057          30,633
Customer spread %                 2.13         2.01                      2.12
Net interest margin %             2.16         2.21      0.40            2.15

The customer spread at 2.08% was at a similar level to that attained in the
first half of 1998.

Continental European spreads are lower at 1.87% compared with 2.08% reflecting
the reducing spreads available in both the French and Italian markets
consequent on entry into the EMU and an increase in the incidence of
remortgaging.  The French margin is also affected by the reducing contribution
of the high margin portfolio acquired in 1996.

Income from capital has reduced to £61.4m from £71.9m both as a function of
reduced average capital balances held and lower effective interest rates.

Notes:
Net interest margins on average interest earning assets are calculated by
dividing total interest income, including income from capital, by the average
of the month end interest earning assets.

Net interest margins on total assets are calculated by dividing total interest
income, including income from capital, by the average of the opening and
closing total assets.

Customer spread is the combination of the average spread over the cost of
wholesale funds earned on loans and advances to customers, plus the average
spread below the cost of wholesale funds payable on customer accounts.


5. NON INTEREST INCOME

a)  Summary analysis

                                          Half Year to 30 June     Year to 31 
                                                                     December
                                           1999           1998           1998
    From:                                    £m             £m             £m
    Loans and advances                     18.3           18.9           41.7
    Retail banking                         20.4           15.2           32.6
    General insurance                      16.1           14.8           57.1
    Independent financial advice           24.6           12.2           26.0
    Life assurance and pensions            21.1           14.5           34.7
    Unit Trusts and PEPs                   15.6           12.6           24.8
    Property services                      13.9           25.3           49.4
    
    UK Retail                             130.0          113.5          266.3
    Continental Europe                      2.6            0.5            1.0
    Treasury                                0.7           (0.5)          (0.6)
                                          133.3          113.5          266.7


Fee income is 17.4% higher at £133.3m but 34.6% higher on a like for like
basis if the contribution of £14.5m from the estate agency operations disposed
of in 1998 is excluded.

Fee income from loans and advances was at a similar level to last year;
although volumes of advances are sharply higher, the proportion upon which a
fee is chargeable in the current market is reduced.

Retail banking fees benefited from increased current account fee and ATM
income whilst general insurance improved consequent upon the increased loan
volumes.

Independent financial advice generated double the income of last year with
both higher numbers of advisers and increased productivity.  Life assurance
and unit trust operations showed significant uplifts with customers showing a
strong preference for equity based savings products in the lower prevailing
interest rate environment.

Property services income is up 28.7%, when last year's contribution from
Woolwich Property Services is eliminated, reflecting primarily an uplift in
the surveying business associated with the increased mortgage activity.


                                        30/6/99        30/6/98       31/12/98

b)  Unit Trusts and PEPs
  
    Funds under management (£m)           2,018          1,425          1,599
    Number of accounts                  339,000        265,000        294,000


c)  Life assurance and pensions

    Funds under management (£m)             564            431            458
    Number of accounts                  176,000        162,000        169,000
    Sums assured           (£m)           5,700          5,300          5,500

   
6.  OTHER OPERATING EXPENSES

a)  Summary Analysis
   
                                          Half Year to 30 June     Year to 31 
                                                                     December
                                           1999           1998           1998
                                             £m             £m             £m
    Salaries                               76.6           73.5          154.4
    Other staff costs                      14.0           12.5           23.5
    Other administrative expenses          83.5           75.3          163.8
    Depreciation and amortisation          24.5           24.0           54.0
    Total other operating expenses        198.6          185.3          395.7


b)  Staff Numbers

    Average number of employees

    Full Time                           30/6/99        30/6/98       31/12/98

    United Kingdom                        5,395          5,721         5,656
    Continental Europe                      363            310           320
    Total                                 5,758          6,031         5,976

    Part Time
    
    United Kingdom                        1,583          1,615         1,620
    Continental Europe                        1              3             2
    Total                                 1,584          1,618         1,622

    Period end number of employees

    Full Time                           30/6/99        30/6/98       31/12/98

    United Kingdom                        5,497          5,593         5,167
    Continental Europe                      370            324           333
    Total                                 5,867          5,917         5,500

    Part Time
    
    United Kingdom                        1,629          1,612         1,542
    Continental Europe                        1              3             1
    Total                                 1,630          1,615         1,543


The figures for June 1998 have been restated so as to be on a consistent basis
with those of December 1998 and June 1999.


c)  Distribution

                                        30/6/99        30/6/98       31/12/98
UK branch and service centres               415            423            417
Woolwich ATMs                               493            455            472
Tied financial advisers                     481            378            450
Independent financial advisers              199            137            163


d)  Year 2000

People are becoming increasingly aware of the 'Millennium Bug' through the
media and Government publications.  The Woolwich's systems were Year 2000
ready by the end of 1998; our activities in 1999 are concerned with
maintaining our compliant status and ensuring we have adequate plans to cater
for any disruption to the services provided to Woolwich.  We are confident
that our preparations are robust and customer services will continue as normal
in the new millennium.  The total cost of Year 2000 activities is expected to
be £26m; actual expenditure up to the end of 1998 was £22m.


e)  European Monetary Union

The Group's preparations for the launch of the euro at the beginning of the
year were all completed and implemented successfully.  The Group's Treasury
operation and our subsidiary companies in France and Italy saw most change as
a result of the introduction of the new currency.

The Group introduced an offshore euro denominated savings account and added
euro denominated travellers' cheques to the range of products and services
available for customers travelling abroad.

The Woolwich recognises monetary union as a key business issue.  At an early
stage a Group-wide EMU Programme, headed by the Finance Director, was
established to oversee and co-ordinate preparations, including those for
possible UK entry, across all areas of the business.

The impact on the Group of the UK joining EMU was assessed in 1998 and has
recently been reviewed in the light of all available information, including
the Government's 'Outline National Changeover Plan'.  Full costs for UK entry
are estimated at between £23m and £30m.

While the position on UK entry remains uncertain the Group will seek to avoid
significant expenditure on preparation where it may prudently do so.


7. TAXATION

The Group taxation charge is 31.8% (1998: 32.7%).  The rate is greater than
the current UK rate due primarily to depreciation of that part of the Group's
property assets which do not qualify for tax allowances.    


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