In the mortgage market there are few, if any, signs of a slowdown in the early weeks of 2003 HBOS

The banking group said pre-tax profits excluding one-off costs rose 22% last year to �3.06bn ($4.85bn).

The figures were welcomed by investors, and HBOS shares bucked Tuesday's downward trend to close 31.5p, or 5.3%, higher at 621p.

The bank indicated that the UK housing market remains healthy, saying it had seen few signs of any downturn in mortgage business.

Analysts said HBOS had done better than some other High Street banks because of its lack of exposure to emerging markets and investment banking operations.

But HBOS added a note of caution for the coming year.

"Uncertainty over economic prospects and international instability may be with us for some time to come, " the bank said.

Debt remains 'affordable'

Despite recent worries from some observers about the amount of debt held by consumers in the UK, HBOS said credit quality remained good.

"Interest rates are now at 40 year lows, and consumer debt generally and mortgage borrowing in particular are likely to remain highly affordable," the bank said.

"With only a modest deterioration in unemployment in prospect we remain confident about the prospects for retail credit.

"Indeed, in the mortgage market there are few, if any, signs of a slowdown in the early weeks of 2003."

HBOS said its mortgage business had exceeded expectations, with the bank winning a 29% share of net mortgage lending.

It also said strong growth in its retail banking business had helped to drive profits higher.

Business on the High Street has been helped by the decision in 2001 to raise interest rates on current accounts to 3%, the bank said.

The rate has helped to attract 2.5 million more customers.