Bank of Scotland, which has just merged with the Halifax, has reported a 7% rise in profits during the first half of the year.

The bank's profits rose to �571m from �535m ($782.2m; 847.2 euros) in the same period the previous year.

This adds up to a total first half profit of �1.5bn for HBOS, when including the first half year results from Halifax reported previously.

The two banks have confirmed that the merger is well on track, that all top 300 management appointments have been made, and that it is the last time that the two banks will report profits separately.

The merger of the banks has created one of the top 10 banks in Europe and the fifth biggest force in the UK.

Mixed outlook

The two groups first announced the tie-up, which they dubbed a merger of equals, in April and the deal was finally sealed this month.

But the outlook for the new entity is mixed.

Although HBOS is now the biggest mortgage bank in the UK, lenders are suffering from stiff competition and some of the lowest rates since the 1960s.

And while the Bank of Scotland saw a rise in profits, Halifax has seen profits drop because of the reduced rates being offered to home buyers.

Nervous investors

HBOS has also warned that conditions are less favourable this year, and has set aside �236m to cover what it expects to be an increase in bad debts.

But balanced against that, HBOS says it is on course to save �620m from operating costs as a result of the merger.

Investors showed signs of nerves about the bank's future, sending HBOS shares 8.17% lower to 753p by the close of trade on Wednesday.