Abbey recorded a 2002 pre-tax loss of £984 million against a year-ago profit of £1.47 billion as bad debts in the corporate banking business piled up.

The bank has vowed to cut £200 million from its core retail operations as it restructures the business into three customer service divisions supported by central admin and IT functions.

A new customer sales unit will be responsible for all channel delivery to both direct and intermediary customers, with a particular focus on increasing contact with customers who no longer visit branches or contact the bank. This will be headed by Mark Pain, formerly managing director, wholesale bank.

Abbey is additionally seeking an external appointment to head up a new customer propositions unit charged with developing customer insights and marketing strategies.

Both units will be supported by a customer operations function built around five product service units including banking and savings, payment processing, investment, asset management, lending and general insurance. This will be headed by Mac Millington, formerly managing director, wealth management and long-term savings.

The IT department, responsible for providing the organisation with all its computing needs, as well as procurement, property and security will be headed by Yasmin Jetha, formerly group IT and infrastructure director.

The bank has set key performance indicators aimed at increasing sales efficiency, profitability and length of relationships. Over the next six months, Abbey says it will aim to deliver tangible improvements in terms of sales and service, supported by the launch of new CRM software 'One on One' and a new advice model, which is currently in testing phase.

In a statement, the bank says: "The new structure will lead to an increased focus on the customer, and is expected to deliver enhanced performance through a streamlining of operations, and much greater emphasis on the economics of distribution and production."

Despite its renewed focus on customer relations, the bank has run into trouble recently following reports that it is to phase out pass books and force low-profit customers to switch to ATM-only accounts. Abbey has also announced plans to extend cheque clearing times from five days to seven days in a bid to minimise cheque bouncing.

There was marginally better news from stand-alone Internet bank cahoot which managed to more than halve losses from £63 million in 2001, to £25 million for the year ending December 2002. Despite the improved performance, cahoot suffered a decline in deposits through 2002 as loss-leading interest rate offers were withdrawn.