In our core business our absolute commitment to customer retention saw us restructure our mortgage and savings products and take the lead in delivering value to the customer. Whilst this meant bringing forward some margin pain it has already enabled us to deliver much stronger results. Last year's strong growth in sales of banking products established the platform for the series of initiatives, such as the 4% current account, which will open up the clearing banks' core markets and deliver additional growth for the Halifax.

For some years our Long Term Savings and Insurance businesses have led the diversification of the Group. Last year's acquisition of a controlling interest in St. James's Place Capital and the Equitable Life transaction not only deliver more growth but also bring about a fundamental shift in the balance of the business.

The comprehensive range of products now available through Halifax Direct and Online, the unique concept that is Intelligent Finance and the excellent value proposition esure will deliver, have all been established in a little over twelve months. They all represent exciting platforms for future growth.

Across the Group the 2000 results saw sales growth generating strong profit uplifts. The outstanding performance in the Long Term Savings and Personal Lines businesses drove profits from our diversified businesses up by 22% to £748m, representing 40% of the total, up from 35% in 1999. We now expect diversified businesses to account for more than half of profits in 2001.

A determination right across the Group to rotate old costs into new investment saw us beat our target of zero growth in targeted costs by 4% or £55m. Despite expectations of substantial growth in sales and activity generally across the Group, we have again committed ourselves to delivering zero growth in targeted costs in 2001.

Halifax's core Retail Operations business continued to perform strongly with profits 5% ahead to £1,332m, driven by sales of mortgages which grew 15% to a record £21bn, a market leading share of 17%. Real success in customer retention enabled us to contain principal repaid to 1999's levels, and as a result net mortgage lending increased by 71% to £4.1bn surpassing our published 10% target.

With retention the key to growth in net lending, through our unique Mortgage Review we have now offered over one million customers the chance of a better deal. A new range of products is now available; all of which will eventually revert to the new 'Halifax Variable Rate' which is expected to track 100 basis points above base rate. The addition of daily interest completes the modernisation of our mortgage product range.

All of these initiatives have been inspired by a determination to be much more successful in retaining customers whilst forcing a reduction in the disparity between the way the market prices existing and new mortgages.

Reduced provisions and a performance on arrears which both improved and bettered the industry averages continue to emphasise the quality of our secured lending assets. Nor has asset quality been sacrificed in pursuit of lending volumes during 2000. Last year the proportion of new lending with a loan to value ratio of 90% or less was 82%, broadly the profile achieved in 1999 and markedly better than the average for the preceding five years.

During the last two years we have totally restructured our savings products and services and today we offer a unique combination of consumer promises; face to face reviews of customers' individual savings needs; the promise to update customers regarding new products and rates which always give the customer full value for choice of service: from the passbook to the Internet.

As a result last year saw the performance of our Savings business improve steadily with balances increasing by £0.4bn to £80.6bn representing 13% of UK liquid savings. The enduring strength of the Halifax's market leading franchise in savings was best illustrated by our continuing success in the new and rapidly growing cash ISA market where our market share now stands at 35%.

Right across our banking businesses the rate of customer acquisition we are currently experiencing is simply inconsistent with the widely held view within the industry that customer inertia is still the order of the day. Even before it was launched, the 4% current account initiative was responsible for a near 30% surge in sales. And in the immediate period since launch, applications are running at three times the equivalent level last year.

Strong growth in the consumer credit division reflected previous significant investment in both capability and management. Outstanding balances on both secured personal loans, up 52% and unsecured personal loans, up 21%, powered ahead. Both business benefited from new products and much improved targeting of existing Halifax customers.

In June our acquisition of the UK credit card business of Bank One Corporation gave us extra capacity and proven capability in the cards market. And following its virtually immediate integration with our existing card business, the acquisition has already enabled us to achieve a marked acceleration in sales. In 2000 outstanding balances rose by 71% whilst the number of cards in issue increased by 57%. Our progress was such that by the fourth quarter of last year we had become one of the market leaders for new card issuance.

In Treasury we continued the process of diversifying revenue streams but nonetheless earnings were below expectations. However, excellent progress was made in the interest rate derivative business in support of the Retail, Wholesale and Treasury businesses. Non-Sterling markets were developed, a Foreign Exchange business established, and the range of counterparties extended significantly to broaden the Group's funding base. The significant investment in systems is providing the foundation for sustainable and quality growth in Treasury earnings.

In Structured Finance the Asset Finance business went from strength to strength with major deals in transport sectors. Already a leading provider of finance in the housing sector, we established a similar position in the PFI market, leading such notable deals as the Glasgow Schools project.

All three Long Term Savings businesses delivered strong growth in sales and profits. An outstanding first time contribution from St. James's Place Capital meant that in total profits leapt by 65% to £320m. The repositioning at St. James's Place Capital of the partnership as private bankers advising higher net worth customers across an extended product range produce immediate results and sales at St. James's Place leapt by 42%.

Sales of individual pensions which doubled, and group pensions which rose 44% enabled Clerical Medical's sales through IFAs to advance by 15%. The Group's asset management arm, Clerical Medical Investment Management, once again produced strong investment performance and now boast an exceptional track record over one, three and five years, a record recently recognised by Professional Pensions magazine who voted them 'Pooled Fund Manager of the Year'.

Under the Halifax brand our focus on simple products and the introduction via 'Direct Offer' of non-advice sales in every Halifax branch gave a major impetus to our bancassurance business where second half sales improved 60% from the first half, ensuring that sales for the year as a whole rose by 12%.

The Equitable Life transaction enables Clerical Medical to achieve a significant extension of its IFA franchise in Group AVCs and Stakeholder. Our asset managers will see funds under management almost double to £67bn. And the creation of 'The Halifax Equitable' salesforce will extend the reach of our bancassurance activities. But most of all we are now well placed to realise significant economies of scale in a business where we are now a market leader. As was also the case with the St. James's Place transaction, this very significant extension of our long term savings businesses has been well received by investors.

Innovative products and sophisticated pricing systems enabled our Personal Lines businesses to make good progress with policy numbers rising by 5% and profits by 10%. Sales of repayments insurance were particularly strong with the book of business growing by 10% to almost one million policies. In March our new repayments insurance subsidiary will launch the next generation protection product for mortgage borrowers. In one product the Total Mortgage Protection Plan provides customers with flexible and affordable cover against death, critical illness, accident, sickness and unemployment. Following the demise of the endowment we believe it will become an industry standard.

Rapid growth in Direct and Online customer traffic has characterised the year in Halifax Direct where we saw a significant uplift in business volumes, doubling sales of both mortgages and personal lending products during the year.

We had real success in growing the online customer base and ended the year with 409,000 registrations, up from 63,000 at the end of 1999. We also cemented our position as the third largest online share dealer in the UK and our online current account base almost quadrupled in the year. Already, Web Saver, the innovative online savings account is the favoured means of savings management for more than 100,000 savers.

Despite the disappointment of last Summer's delayed launch, Intelligent Finance, our new telenet bank, has made remarkable progress. Just over a year ago this was a greenfield site. Now there are 1,400 staff housed in two purpose made buildings located in Edinburgh and Livingston. By October, we were ready to launch our unique banking concept (patent pending) which connects five mainstream personal banking products - something no other new bank has done.

The telephone service was launched in October, and the Web followed shortly after in December. By the end of 2000 we had received in excess of 80,000 account applications approving £500m of new borrowing. Since the beginning of 2001 the business has gained momentum. We are now experiencing daily application levels of 2,300 and rapidly approaching approved but not yet completed borrowing of £1 billion. Currently 54% of the business is coming through the Web channel, an increase over our previous estimates. More than 23,000 intermediaries have registered to do business with Intelligent Finance and already we are seeing over 50% of our mortgage business coming through this channel. The Intelligent Finance unique banking proposition using 'connectivity' is bringing new business to the Group across the entire range of personal banking products, with more than 65% of customers having a current account, credit card or personal loan. Over 90% of Intelligent Finance business is new to the Halifax Group.

Having established its systems capability in just six months, our insurance joint venture with Peter Wood, esure, opened for business on schedule in January 2001. The venture is initially offering Halifax branded motor insurance via a traditional call centre environment and wil be followed by Halifax and esure branded Internet offerings.

The economy was healthy in 2000 and there is every chance it will remain so in the current year. We do expect interest rates to fall further and this should underpin the fortunes of the personal sector. The housing market has slowed, but the outlook is positive. House prices should rise modestly in 2001 given the sound economic background, the likelihood of lower interest rates and affordability levels that are not stretched.

As we did at Intelligent Finance, we have continued to attract outstanding managers and teams to our cause. Peter Wood quickly assembled an exceptionally experienced team at esure whilst the acquisition of Bank One International brought James Corcoran and his team to the Halifax; delivering a quantum step in our capability in this business area.

The Group-wide bonus schemes introduced last year have been a great success and against suitably stretching targets, have been enhanced for 2001. In order to further incentivise our colleagues' commitment to the creation of shareholder value we intend to seek approval at our Annual General Meeting for a Group-wide share option scheme under which everyone outside the top 250 executives will be granted some options over shares to the value of 20% of their salary. These are both critical aspects of the cultural change we must achieve.

We have invested heavily in transformation; laying the foundations for growth in our existing business and creating an unparalleled range of new channel ventures. These results show the first signs of pay back - sales growth. Buoyant trading across almost all our product lines in the early weeks of 2001 really reinforce our belief in the stretching growth targets we have set ourselves for 2001.

Financial services is becoming more consumerist and retail in character by the day. The battle is now on for the hearts and minds of consumers. And that is the battle the Halifax is absolutely determined to win.

James Crosby Chief Executive