Lloyds TSB remains upbeat on future prospects

Pre-tax profits at the UK's fifth-biggest bank rose to �1.7bn ($2.9bn) from �1.6bn a year ago.

The figure was safely within analysts' forecasts of �1.6bn to �1.8bn.

However, bad debts at its retail banking division rose by 21% over the period, prompting traders to mark the firm's shares down 1.4% to 482 pence.

The bank said its overall credit quality was satisfactory.

However, with a slowing economy and fading consumer boom, investors have been increasingly concerned about the impact of rising bad debts on the banking sector.

We are well positioned to deliver a good trading performance in the second half of 2005 and beyond Eric Daniels, chief executive See Lloyds TSB's share price

"We have seen some softening and deterioration in the unsecured book but we are quite comfortable," said Lloyds TSB chief executive Eric Daniels.

"We are seeing a slowdown but the consumer hasn't stopped dead by any means."

Selling extras

Retail banking profits rose 3.75% to �830m, the High Street bank said, while profits from wholesale and global banking increased 14% to �662m.

The amount of money lent to customers during the half rose by 4% to �167bn and customer deposits rose by 3% to �130.6bn.

Meanwhile, the bank reported a substantial increase in sales of life assurance and managed to increase its market share.

Part of the bank's current strategy to boost revenue growth is to sell more products to retail customers and extra services to corporate borrowers.

This contrasts with the tactics Lloyds adopted in the 1990s, which relied on takeovers and cost cuts.

"We are well positioned to deliver a good trading performance in the second half of 2005 and beyond," said Mr Daniels.

Lloyds TSB owns Scottish Widows and Cheltenham & Gloucester, and has 15 million account holders and more than 2,000 branches.

It is the largest UK bank to report first-half results so far this year. Next week sees interim profit reports from HBOS, Royal Bank of Scotland and Barclays.