HBOS' heavy weighting in mortgages means the strains caused by the economic slowdown will result in only a modest overall increase in provisioning

HBOS

But for Britain's largest mortgage lender to increase revenues it will have to take a larger slice of the profitable small business banking sector, of which it holds only 3%.

Last week, HBOS made its first stab at breaking the dominance of the UK's four big banks by offering to pay interest on business accounts.

HBOS has already started the offensive in retail banking by offering higher interest on current and check accounts.

All is well

The bank now expects to achieve annual cost savings of �340m, up from �305m, while it now sets the boost to revenue at �350m, up from �315m.

Part of that saving, the banks said in May, will come from getting rid of 2,000 jobs - although the posts are expected to be lost through natural wastage, rather than redundancies.

Sales were ahead of plan in mortgages, savings, current accounts and consumer finance and it has sustained its 25% share of the mortgage net lending market throughout the year, HBOS said.

In its trading statement, HBOS also said the assets securing loans remained good in an attempt to ease investors' fears over bad debts as the economy slows.

"HBOS' heavy weighting in mortgages means the strains caused by the economic slowdown will result in only a modest overall increase in provisioning," it said.

HBOS has already said it has no exposure to bankrupt US energy trader Enron, unlike many other banks.

HBOS shares were flat in morning trading following the announcement, dropping just 0.25% after earlier narrow gains.