UK bank HBOS Plc said on Tuesday it planned to wipe out its 1.8 billion pound pension deficit and its 2005 earnings were likely to beat market expectations due to cost controls and growth at its insurance and investment units.
HBOS, Britain's fourth-biggest bank and the country's biggest mortgage lender, said it intended to erase its 1.8 billion pounds ($3.12 billion) pension deficit (under international accounting standards) over the next decade.
"It's a debt like any other and a financially strong business like ours accelerating the elimination of that deficit is simply doing the prudent thing," HBOS chief executive James Crosby said.
The bank also said it planned to repurchase up to 750 million pounds of shares next year and said 2005 earnings were likely to exceed market expectations of 84.4 pence per share, up from 78.3p in 2004.
The bank said it had bought back 910 million pounds of this year's buyback target of 1 billion pounds.
"It's the result very much of our strategy of delivering good, but measured growth, across all our banking divisions and stronger growth in our insurance and investment businesses. Put that alongside tight cost control and stable margins and you get a strong bottom line," Crosby told Reuters in an interview.
By 1320 GMT HBOS shares were up 4 percent to 901-1/2 pence, the best performing UK blue chip share, lifting its market value to 35 billion pounds.
"The market likes the strong capital position and the fact this allows them to continue making buybacks into 2006. That also seems to indicate they're not hoarding any capital to make acquisitions," said Richard Staite, analyst at SG Securities.
There had been speculation HBOS was considering buying Australian bank St. George.
Crosby said acquisitions were still possible, however: "We've had no intention of building up a warchest with which to make acquisitions that we could get through without effectively consulting shareholders. But it doesn't mean that if the right acquisition came along we wouldn't want to go ahead with it."
A slowdown in the UK economy this year has raised concern that HBOS's hefty UK focus means growth would be restrained.
British finance minister Gordon Brown slashed his economic growth forecasts on Monday to just 1.75 percent instead of the 3.0 to 3.5 percent previously predicted.