The UK's sixth biggest bank Abbey National has said it expects to make a loss for the full financial year as it continues to grapple with a tide of bad loans.

Luqman Arnold pledges to turn Abbey around

The company said in a trading update that financial charges and accounting changes would result in a loss "at the level of the Group's full-year 'headline' results".

Last year, Abbey made a profit of �1.9bn ($2.9bn).

But the firm said it would not provide full details of a much anticipated restructuring programme, widely expected to include job losses and a cut in its shareholder dividend, until it publishes full-year results on 26 February.

Turmoil

Abbey National's financial performance has faltered this year because of bad corporate loans extended during the boom years of the late 1990s.

The firm's shares plunged earlier this year after it missed its profit targets, prompting the dismissal of former chief executive Ian Harley in July.

Abbey's deteriorating financial health has also encouraged unwelcome takeover bids, most recently from Bank of Ireland.

Mr Harley's successor, Luqman Arnold, said a new focus on personal financial services would form a central plank of the firm's comeback strategy, and hinted that the turnaround is likely to cost some jobs.

"We need to reduce progressively our exposure and resource commitment to those activities that are not central to our core personal financial services strategy," he said in a statement.

Profits pressure

Earlier this year, the bank was reported be planning to lay off 3,000 staff, or one tenth of its workforce.

Abbey confirmed on Wednesday that it would write off part of the cost of some past acquisitions to take account of a subsequent decline in their market value.

The bank added that it planned to treat the cost of stock options granted to senior management as an expense, a move that will further dent profits.

And it said it had set up a new business unit responsible for reducing the bank's exposure to risky investments made by its troubled wholesale banking division.

Shareholders watch

Abbey also signalled that its dividend - an annual payment to shareholders - would probably be reduced.

A cut in Abbey's dividend would come as a blow to its institutional investors.

But it would also affect millions of Abbey account holders who were handed a free stake in the former building society when it converted to a publicly listed company in 1989.

However, Abbey's latest progress report helped lift its share price by 1.3% to 647.5p by mid-afternoon on Wednesday.

While Abbey shares are up from the lows they touched in early October, they are still down by 34% since the beginning of the year.