HBOS's ambitions leave City unmoved

HBOS, the country's largest mortgage lender, promised to grab the title of largest savings and pensions provider from insurers Aviva and Standard Life yesterday after announcing a 21% rise in interim pre-tax profits.

The increase, to £1.8bn, was not enough to satisfy the City, however, which has become used to a faster rate of growth from the merged Halifax and Bank of Scotland.

John Paul Crutchley, a banking analyst at investment bank Merrill Lynch, said: "The market is used to a turbo-charged growth story. Its growth hasn't really beaten expectations".

The 17.5p fall in HBOS' shares to 775p was also attributed to lingering concerns about the fast rate of growth in the corporate banking arm, where two £20m bad debt provisions were incurred. One of the provisions was for loans to split capital trusts; the other was for power projects. Head of corporate banking George Mitchell warned that further provisions might be needed for troubled power project loans.

James Crosby, the HBOS chief executive who has set his sights on breaking the dominance of the "big four" - Lloyds TSB, Barclays, Royal Bank of Scotland and HSBC - of the current account market, is now seeking dominance in savings and pensions.

He said this was a "very realistic objective" and would require HBOS, which owns the Clerical Medical brand, to leapfrog Aviva and Standard Life. Mr Crosby said HBOS was already on track to beat its own targets, including breakeven by the end of the year for Intelligent Finance, the internet and telephone bank.

The bank continued to take a 25% share of all new mortgage lending in the first half, ahead of its target of 23%, even though it has not rushed to chase business in the active re-mortgage market.

The synergies from the merger of BoS and Halifax are being achieved ahead of schedule. Some £250m had been achieved in the first half, out of a planned total of £470m for the year.

HBOS is increasing its dividend by 5% to 10.3p.