Abbey National, the UK's second largest mortgage bank, says it is open to offers after it reported a 15% rise in profits to more than �1bn for the first six months of this year.

Commenting on speculation that after the failure of the hostile takeover bid by Lloyds TSB, Abbey might be looking for a deal, chief executive Ian Harley said he wanted to "grow the business".

"Whether European banks are interested in entering the UK market is a moot point, but we are certainly the most interesting property around," chief executive Ian Harley told BBC News Online.

Abbey National on Wednesday reported pre-tax profits had increased to �1.06bn ($1.51bn) for the first half of the year, up from �922m last year and in line with analyst expectations.

The figures come just two weeks after Trade Secretary Patricia Hewitt blocked Lloyds TSB's �18bn bid for Abbey, saying the deal would be against the public interest, thereby effectively halting further consolidation in the UK banking sector.

Abbey's shares have outperformed the UK banking sector by about 7% so far this year.

Banking consolidation

Since the ruling, there has been speculation Abbey National would seek an overseas partner or prey on some of the smaller players in the UK banking sector.

"I think we have options. We have been serial acquirers and we are looking to grow the business," said Mr Harley.

He declined to comment on any possible suitors but speculation has focused on the Allied Irish Bank, the Bank of Ireland and also the National Australia Bank.

New business

A strong performance from retail and wholesale banking helped revenue grow by 14% while costs rose only 6%.

But Abbey has been moving away from its traditional mortgage business, where margins are shrinking, and its diversified portfolio now contributes 55% of its income.

"The biggest growth areas are in life assurance, long-term savings, wealth management, business banking and current accounts and more international diversification," Mr Harley said.

Abbey is hoping to further diversify and hopes to earn 65% its income from non-mortgage and savings business by 2002.

Mortgage peak

The days of mortgage price wars between banks could be coming to a close, the reason why Abbey is looking elsewhere for income.

"Overall, the mortgage story will reach a conclusion by early 2002, because of the mortgage spread tightening," said Mr Harley.

But he still sees mortgage and savings as a key part of the company's business because of the strong housing market.

"We wouldn't like to see as much house price inflation as in the first half of the year but we have seen no lack of consumer confidence," he said.