Lloyds TSB, which was prevented from taking over Abbey National this month, reports a 11% fall in profits and a �329m loss on the stock market for the first half of 2001.

In the first half of 2001 the FTSE All-Share index fell 8.6% causing the �329m investment loss, but Lloyds said in a statement that the "adverse short-term fluctuations should not represent a permanent impairment".

Pre-tax profits fell to �1.84bn but excluding the exceptional costs of �399m, Lloyds' profits were up nine percent, to �2.24bn ($3.19bn) from �2.05bn, on revenues of $4.7bn, which were up 12%.

There was also a �54m charge for restructuring, plus �16m in costs for the takeover attempt on top of the losses on the stock market.

Excluding exceptionals

The initial market reaction to the results was positive because they were better than had been expected.

The shares were up 3% at 683p by 0715 GMT.

Lloyds, once the top rated UK bank, has seen its shares slide from a peak of around �11 in 1998, reflecting growing concerns over revenue growth prospects in the banking sector.

Perfect match

There was no meaningful update from chief executive Peter Ellwood on his ambition to secure acquisitions on the continent.

"We have talked with our counterparts from many financial services companies, particularly in Europe," Mr Ellwood said.

The bank, like Abbey National, has now turned its attention to continental Europe for a deal as consolidation in the UK has been effectively halted.

"Whilst the acquisition of Abbey National would have complemented our group, it was never going to be a transitional deal, nor has it sidetracked us from growing and building our business," Mr Ellwood said.