UK banking group Alliance & Leicester has announced that it will buy back some of its shares, after reporting a 12% increase in profit.

A&L said its half-year profits rose to �233m ($368m) before tax, compared with �208m during the same period last year.

Mr Pym said the bank had hit its targets

The bank acknowledged that its results had been boosted by record low interest rates in the UK, which have fuelled the housing market and consumer borrowing.

The profit figure was pretty much expected - analysts had forecast a range of �214-234m.

"We are delivering sustainable long term value to our shareholders and to our customers," said Richard Pym, group chief executive.

"We have hit all our key targets, the company is growing in the areas we planned to grow in," he added.

The news was welcomed in the City of London, where the group's shares cruised up 4% in early trading.

At 1511 GMT, the shares were up 3.5% at 746p.

Bigger dividend

A&L said on Friday it could return about �200m ($315m) to shareholders through the share buyback programme.

The banking group also said that its interim dividend paid to shareholders had risen 10% to 13p a share.

At the end of the half-year period, ending 30 June, the bank's bad debt provisions were �34m.

The group added that the credit quality of its customers was still good.

A&L is one of the smaller banks in the FTSE 100 index of leading UK shares and employs 9,000 people.