UPDATE 1-Cattles confident on 2008, ends takeover talks

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LONDON, May 9 (Reuters) - British subprime lender Cattles (CTT.L: Quote, Profile, Research) said on Friday it was confident in its prospects for the year and was no longer interested in buying a consumer finance business that it had held talks with.

The company expects to get around 1 billion pounds ($2 billion) in deposits by 2010 once it becomes a bank. A spokesman said Cattles expects a banking licence to be granted in the last quarter of 2008 or the first quarter of 2009.

Trading in the first quarter of 2008 met expectations with customer numbers continuing to grow at around the same rate as 2007 and loan arrears were flat, it said.

"The group is achieving higher margins on its new lending volumes and has tightened its lending criteria," it said in a trading statement.

Shares in Cattles rose 0.2 percent to 247 pence a share by 0725 GMT.

"Cattles is confident that it will obtain the remaining 100 million pounds of new debt funding which it requires to finance its 2008 business targets."

Cattles recently agreed 100 million pounds of net new borrowing through a syndicated bank loan, taking its net new facilities in 2008 to 200 million pounds. And last month it unveiled a 200 million pounds rights issue to fund its conversion to a bank.

"The Group has been involved in discussions regarding a possible acquisition of a substantial consumer finance business, which would have included a banking licence," Cattles said. It did not name the potential target.

"The Board concluded that the proposed acquisition was not in the best interests of the Group and Shareholders and discussions were terminated." (Reporting by Chris Wills, Editing by Jason Neely and Quentin Webb)