The UK bank, which in December shelved plans to develop an Internet-only bank for the mass affluent, says the profit shortfall in part reflects a £48 million spend on the bank's new technology strategy.

Announcing the results, Alliance & Leicester's executive chairman John Windeler, plays up the importance of the bank's technology strategy as it seeks to retain its independence during a period of industry consolidation: "Competition will remain intense, both from existing players and new entrants. Our technology strategy will enable us to simplify our working processes to reduce costs, and will also improve customer service, helping to drive up retention and cross-sale rates."

The new strategy - agreed in 2000 and reflected in the decision to fold the Internet-only banking operation into the core activities of the bank - calls for integrated customer access all products and channels. The bank believes it is better equipped to deliver on this strategy than its competitors, as it has a sufficiently broad product range and technology systems that are neither "too large, nor too old".

The bank has been encouraged by customer drift to electronic channels over the past year. In 2000, A & L logged more than two million visits to its retail banking Web site, leading to over 88,000 product applications - a three-fold increase over the previous year. More than 10% of new personal loan applications were received through this channel during 2000 and - following the launch of the bank's Internet credit card application micro-site in May - a similar proportion of credit card applications now also arrives over the Web.

"Industry indications are that the amount of business written by Alliance & Leicester through the Internet is more than five times that of our competitors," says Windeler.

Ten per cent of all in-branch appointments are now made as a result of cold-calling customers who have been plucked from the company database using data mining technology. During 2000 more than 80% of the resulting branch interviews led to the sale of at least one product, says the bank.

The bank is also rolling out technology to make the mortage application process simpler. A& L says it will take advantage of branch-based access to credit scoring and introduce point-of-sale decision-making for mortgage applications across it high street network over the coming months. The nationwide roll out follows a successful trial in Scotland and entails eligible applicants being furnished with a committed mortgage offer on the spot.

The bank is also preparing to launch an Internet-based electronic mortgage application system for intermediaries. This will offer intelligent application forms, on-line decisioning at point of sale and on-line case tracking.