Britain's biggest mortgage lender HBOS has reported a 22% rise in annual profit fuelled by a booming housing market, but the figure fell short of analysts' forecasts.
The UK's fifth biggest bank said 2002 pre-tax profits before exceptional items rose to £3.062 billion sterling - below market forecasts of £3.149-3.425 billion, with a consensus at £3.282 billion. The full year dividend rose 5% to 29.4 pence.
HBOS said the economic outlook remained uncertain, but the group was well placed.
HBOS was formed in 2001 by the merger between Halifax, the country's biggest mortgage lender, and Bank of Scotland. The merger has gone well and has led to significant cost-savings and higher revenues, and HBOS said that its cost to income ratio - a measure of how efficiently it runs the business - had fallen to 45% from 49%.
Fears that credit quality may deteriorate in an economic downturn have hit many banks. Bad debt charges for HBOS rose to £832 million from £608 million a year ago, but HBOS said its overall credit quality was sound.
'With the UK economy still likely to expand this year at a similar rate to that achieved in 2002, and with little near term prospect of any increase in interest rates, a significant further deterioration in corporate credit conditions is unlikely,' the bank said in a statement.
